Google and Microsoft smash estimates on strong cloud growth

The two tech giants saw profits increase by 41% and 48%, respectively

Trade

Sundar Pichai, Google

27 October 2021

Google and Microsoft reported their latest quarterly earnings on Tuesday with cloud services and hybrid work proving a boon for both tech giants.

Microsoft announced that for Q1 2022, it recorded $45.3 billion in revenue, an increase of 22%, while profits were also up an impressive 48% at $20.5 billion.

Google’s Q3 2021 earnings revealed a continuation of its long-running track record of smashing revenue figures year after year. It amassed reveue of $65.1 billion for the three month period, which represents a a 41% increase compared to Q3 in 2020 which stood at $46.1 billion.

Following the earnings announcement, Google’s share price soared just shy of 18 points (0.65%) while Microsoft enjoyed a similar increase of 0.64%.

Commenting on the news, Sundar Pichai, CEO at Alphabet and Google (pictured), said: “Five years ago, I laid out our vision to become an AI-first company. This quarter’s results show how our investments there are enabling us to build more helpful products for people and our partners.

“Ongoing improvements to Search, and the new Pixel 6, are great examples. And as the digital transformation and shift to hybrid work continue, our Cloud services are helping organisations collaborate and stay secure.”

Satya Nadella, CEO of Microsoft, said: “Digital technology is a deflationary force in an inflationary economy. Businesses – small and large – can improve productivity and the affordability of their products and services by building tech intensity.

“The Microsoft Cloud delivers the end-to-end platforms and tools organisations need to navigate this time of transition and change.”

One commonality from both companies’ earnings is that cloud services drove figures higher, and in Google’s case, much higher than ever before.

Google generated an additional $1.5 billion revenue for Google Cloud this quarter compared to Q3 2020 with a total $4.9 billion. That said, Google Cloud is still operating at a loss with income down $644 million – quite a considerable drop and a bigger loss than last quarter which stood at $591 million. Though the figures are improving year-on-year as Q3 2020’s losses stood at $1.2 billion.

Microsoft’s cloud revenues continued to impress investors with Intelligent Cloud up 31% to $17 billion, while revenue from server products and cloud services increased 35%, driven by a business-leading revenue growth rate of 50% thanks to Azure and other cloud services.

Consumer and business Office services also enjoyed a strong quarter, factoring into rising cloud revenues too. Office Commercial products and cloud services revenue increased 18%, largely driven by the 23% revenue growth of Office 365 Commercial. Office Consumer products and cloud services revenue increased 10% with consumer subscribers increasing to 54.1 million.

Other strong areas for Microsoft included LinkedIn revenue which increased 42% and Windows OEM revenue which increased 10%. Google reported consistently better results across most corners of the business. Search revenue was up to $37.9 billion this quarter, a staggering $11 billion increase year-on-year.

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