Alphabet Shares Plunge 9.8% on Weak Earnings as Microsoft Rises on Azure Growth
Alphabet shares tumbled 9.8% after missing third-quarter profit estimates, while Microsoft gained 2.9% on strong Azure cloud growth. Meanwhile, Fortinet plummeted 25.7%, dragging down cybersecurity stocks amid mixed global markets.
Alphabet shares tumbled 9.8% in after-hours trading following a weaker-than-expected third-quarter earnings report. The tech giant posted a sharp drop in net income to $26.17 million, compared to $34.98 billion in the same period last year. Adjusted earnings per share stood at $2.67, missing the consensus estimate of $3.02.
Revenue reached $127.58 billion, slightly below analysts' expectations of $128.22 billion, while operating income came in at $40.58 billion against a forecast of $43.19 billion. Alphabet reported a negative free cash flow of $9.07 billion, significantly wider than the anticipated negative $2.70 billion. Meanwhile, the company maintained its annual capital expenditure (Capex) guidance between $195 billion and $205 billion, and its debt surged 479% to $125.1 billion.
In contrast, Microsoft shares rose 2.9% in after-hours trading after reporting a fiscal first-quarter net income of $36.63 billion, up from $27.75 billion a year earlier. Adjusted earnings reached $4.89 per share, beating the estimated $4.73. Revenue grew 19% year-over-year to $92.28 billion, topping the $90.69 billion consensus.
Azure cloud services revenue surged 48% to $33.17 billion, exceeding expectations of $32.32 billion and making Azure Microsoft's largest business segment. Microsoft posted a positive cash flow of $18.63 billion and issued strong guidance for the current fiscal quarter, projecting revenue between $96.0 billion and $97.1 billion.
Cybersecurity firm Fortinet suffered a 25.7% plunge in after-hours trading after its quarterly results failed to impress investors despite beating consensus estimates. Fortinet posted third-quarter revenue of $2.08 billion and an adjusted profit of 91 cents per share, topping forecasts of $2.06 billion and 86 cents, respectively. Billings grew 29% to $2.336 billion, slightly above expectations.
Wells Fargo analysts attributed the sell-off to a narrower margin of outperformance compared to previous quarters. The disappointing report dragged down competitor stocks, with Check Point Software Technologies falling 4.5% in after-hours trading, Palo Alto Networks and CrowdStrike dropping 6.4%, and Zscaler declining 6.0%.
Asian stock markets displayed a mixed trend following modest gains on Wall Street, where the Dow Jones rose 0.2%, and the Nasdaq and S&P 500 added 0.3%. Futures on the Nasdaq dropped 1.3% following Google's disappointing earnings and Fortinet's sharp sell-off.
Samsung shares fell 5% after reporting third-quarter revenue of 195.25 trillion won ($124 billion), a 126.88% increase year-over-year but slightly below the 195.79 trillion won consensus. Operating profit surged 783.11% to 107.44 trillion won ($68.23 billion), making Samsung the first technology company globally to surpass 100 trillion won in quarterly operating profit, driven by robust demand for AI memory chips.
