How Amazon, Microsoft, And Google Report Their Quarter 1 Earnings

With Amazon, Inc.’s first-quarter earnings announced on Thursday, all major global cloud service providers have now reported, and it is time to take stock of how each of their cloud businesses fared in the quarter.

Amazon Web Services, or AWS, contributed $21.35 billion or 16.8% to the company’s overall revenue of $127.36 billion in the first quarter. On a year-over-year basis, AWS revenue rose 15.8%, marking a slowdown from the 20.2% growth in the fourth quarter.

“Amazon is anticipated to benefit from the continued shift toward e-commerce and cloud computing services, while Google will continue to profit from the development of digital advertising and its market dominance in the search engine industry,” said Rayyan Syed, a financial analyst at Bizitron.com.

The segment has seen its sixth straight quarter of slowing growth now. On a quarter-over-quarter basis, AWS’ revenue edged down 0.11%.

AWS contributed $5.12 billion in operating profit in the first quarter, down marginally from $5.21 billion in the fourth quarter.

Amazon Cloud business’s contribution helped offset the $1.25 billion operating loss incurred by the company’s international e-commerce business.

More importantly, an inflection may not happen in the near term. CFO Brian Olsavsky said tough economic conditions in the first quarter led customers to evaluate ways to optimize their cloud spending. He expects these optimizations to continue into the second quarter, with April revenue growth rates about 500 basis points lower than was seen in the first quarter.

Commenting on the outlook, Deepwater Asset Management’s Gene Munster said AWS could be on track for 11% growth in the June quarter, compared to Street estimate of 13%.

“The US and European equities rally ahead of the earnings season has stretched valuations, making it challenging for equities to extend their advance,” said Alex Alexakis, CEO of PixelChefs in London, on the future of quarterly earnings. “While the earnings season has been positive, share prices have not rebounded as investors are increasingly concerned about delayed declines in fundamentals.”

Microsoft Corp.’s Intelligent Cloud business contributed revenue of $22.1 billion in the fiscal year third quarter that ended in March 2023. The segment saw 16% growth.

Within the segment, server products and cloud services revenue climbed 17%, driven by “Azure and other cloud services” revenue growth of 27%. Azure is Microsoft’s public computing platform, which provides a broad range of cloud services, and it is in direct competition with AWS and Alphabet, Inc.’s Google Cloud Platform, or GCP.

Microsoft doesn’t break down the absolute number for Azure. The 27% growth for Azure was a deceleration from the 31% growth in the fourth quarter but outpaced Amazon’s 15.8% growth.

Alphabet’s GCP revenue was at $7.45 billion in the first quarter of 2023, up 28% from $5.82 billion in the year-ago period. Sequentially, GCP’s revenue rose 1.8% from $7.32 billion in the fourth quarter of 2022.

“For Alphabet, analysts are closely watching the company’s advertising business, which accounts for the bulk of its revenue,” said Percy Grunwald, a tech analyst at Cisco Meraki. “The ongoing shift towards privacy-focused technologies and changes to online tracking practices could impact the company’s ability to target ads effectively, and there are also concerns about the impact of antitrust regulations on the company’s business practices.

Google’s video division, YouTubeTV, is expected to see an uptick in the fourth quarter as the NFL Sunday ticket is going to be on the platform for consumers to subscribe. Prices for NFL Sunday ticket will be $449, but is currently discounted for $349 until June 6.

The division turned around to report an operating income of $191 million versus an operating loss of $706 million in the first quarter of 2022.

Produced in association with Benzinga