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Global Economy

Google and Microsoft defy strong dollar

The Google parent company Alphabet has felt the effects of the global economic slowdown and the strong dollar. In the past quarter, quarterly profit fell from 18.5 to 16 billion dollars year-on-year, as the US technology group announced last night after the US stock market closed.

Growth more and more subdued

Sales climbed 13 percent to just under $69.7 billion. The revenue growth rate declined for the fourth consecutive quarter, falling to its lowest level in two years. Google CFO Ruth Porat nevertheless spoke of “solid” numbers. She pointed out that currency-adjusted revenues had increased by 16 percent.

The strong dollar had cost Google three percentage points of sales growth. Porat warned that investors would have to brace themselves for an "even stronger headwind" in the current year. The US dollar is currently trading at a 20-year high.

Advertising business is still going well

The advertising business stood out positively in the balance sheet: the most important area of the Google group grew by 11.6 percent to 56.3 billion dollars in a year-on-year comparison. The Internet giant defied the deteriorating market conditions: In view of the high inflation and the weakening economy, a downturn in online advertising spending had recently become apparent as companies put the brakes on costs.

When classifying the figures, it is also important to consider a base effect. Google's chief financial officer, Ruth Porat, emphasized that every apparent weakness is based not least on a comparison with the strong figures from the previous year. A year ago, Google benefited significantly from the home office trend, with revenues jumping 62 percent at the time.

Google stock in demand

Investors reacted with relief to the presentation of the balance sheet figures. Alphabet, Google's parent company, jumped 3.5 percent in after-hours trading. However, the paper had already lost around 27 percent this year and thus more than the S&P 500.

The positive market reaction is also due to the market expectations, which had already fallen sharply in advance. Analysts had expected a weak quarter and have recently reduced their forecasts further and further in view of growing fears of a US recession and disappointing figures from smaller tech companies such as Snap.

Microsoft increases profits and sales

In contrast to Google, the market reaction to Microsoft's quarterly figures, which were also presented yesterday evening, was initially negative. Microsoft shares initially fell three percent in after-hours trading, but were then able to turn positive. Microsoft had increased its net income in the fourth business quarter to 16.7 billion dollars after previously almost 16.5 billion.

Revenue increased 12 percent to $51.9 billion. Adjusted for currency effects, the increase in sales amounted to 16 percent. Microsoft generates more than half of its revenue outside the US and is therefore more dependent on the development of the dollar. Corona lockdowns in China, burdens from the Ukraine war and the recently weak PC market also made business difficult.

The quarterly figures from Facebook owner Meta, which will be published tonight after the US stock market close, should cause as much excitement as the figures from Microsoft and Google. Analysts fear the first decline in sales in the history of the social media group.

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