Sunday, May 26

Google and Microsoft hit by slowing economy

Sales at Alphabet and Microsoft have fallen substantially, adding to concerns about an economic slowdown.

Alphabet, which controls Google and YouTube, reported a 6% increase in sales to $69 billion in the three months to September as companies slashed their advertising budgets.

Outside of the onset of the epidemic, it was the US firm’s worst quarterly increase in nearly a decade.

Meanwhile, Microsoft reported a drop in demand for its laptops and other equipment. Its revenues increased by 11% to $50.1 billion, the weakest rate in five years. Globally, consumers and businesses are cutting back as prices and interest rates increase, fueling fears of a worldwide recession.Alphabet’s profits fell nearly 30% to $13.9 billion in the third quarter, as YouTube ad sales fell for the first time since the company began reporting them publicly.

The company’s sales growth has decreased for five consecutive quarters. A high US currency has also harmed American multinational corporations by increasing the cost of selling items abroad. Boss Sundar Pichai said that Alphabet was “sharpening” its focus and “being responsive to the economic environment”.

“When Google stumbles, it’s a bad omen for digital advertising at large,” said Evelyn Mitchell, principal analyst at Insider Intelligence, noting that Google’s core website has in the past been much more resilient to ad expenditure recessions than social media sites like Facebook or Snap.

“This disappointing quarter for Google signifies hard times ahead if market conditions continue to deteriorate.”

Microsoft said it expects demand for its PC and cloud computing technology to continue declining this year as business clients cut back.

Sales in its Xbox video gaming business have also plummeted.

Big tech corporations saw their sales surge in the epidemic as locked-down consumers and workers grew to rely more on their equipment. But the sector’s fortunes look bleaker in the current climate.

In recent months, Alphabet has stated it was limiting hiring, while Microsoft has eliminated workers.

Many other digital companies have decided to lay off personnel, like Netflix and Twitter, or restrict the pace of recruitment, such as social media site Snap.

Shares of both Alphabet and Microsoft sank substantially in after-hours trade on Tuesday.

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