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Alphabet posts earnings beat, Microsoft smashes expectations

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Yahoo Finance Live breaks down the latest earnings reports for Alphabet and Microsoft.

Video Transcript

JULIE HYMAN: Let's start, though, with the tech biggies here this morning that reported after the close of trading yesterday. Talking, of course, about Alphabet and about Microsoft. Our Emily McCormick is here to give us all of the important numbers we need to know. Emily, good morning.

EMILY MCCORMICK: Good morning, Julie. And we did get some better than expected third quarter results here from Alphabet. That big tech company posting bottom-line and top-line results that exceeded Wall Street's expectations. And taking a look at earnings per share here, those nearly doubled compared to last year to come in at more than $27. And then revenues minus traffic acquisition costs were up 41% over last year to come in at $53.6 billion.

Now, Google services revenue specifically, which includes its all-important Google Search ads business, grew 5% quarter-over-quarter to reach $59.9 billion. You can see that that year-over-year increase was even more pronounced. But the company did also note that retail advertisers were the biggest contributors there, as were media and entertainment, finance, and travel advertisers.

Now, based on these results, Google definitely saw more resilience in its ads business than we saw from Snap in its results last week, when that company had noted that Apple's iOS data privacy changes had impacted results and would continue to impact results into the current quarter. Now, Alphabet CFO Ruth Porat did say that there was a modest impact to YouTube's ad business specifically as a result of these iOS changes. But again, overall still a beat on the top line.

Now, that said, there were a couple of pockets relatively less strengthier for Alphabet. That could be why we're seeing the stock off just slightly in pre-market trading. YouTube revenues overall were up 43%, while Cloud Sales were up 45%, both of these rates slowed down compared to the second quarter. So again, a little bit disappointing here considering that those are areas that the Street tended to look for for outperformance in terms of growth rates. And, in fact, just taking a look at what analysts have been saying, JPMorgan analyst Doug Anmuth wrote in a note this morning, quote, "3Q was not quite as clean as Alphabet's recent quarters, as about 3% upside in Search was partially offset by 2% lighter revenue in both YouTube and Google Cloud, Alphabet's typically higher-growth businesses.

Now, turning over to another big tech company that reported earnings yesterday, that was Microsoft. And again, some stronger-than-expected results here for that company. That stock is actually getting rewarded for these earnings. And we saw revenue growing 22% over last year to $45.3 billion, driven by a 31% jump in Intelligent Cloud revenue and in turn an about 50% increase in Microsoft Azure, which, of course, is that all-important cloud business and a competitor to Amazon Web Services.

Microsoft also saying on its earnings call yesterday that it expects Intelligent Cloud sales to come in at as much as $18.4 billion for the current quarter. That also was ahead of estimates, but really a strong beat across all major metrics here for Microsoft. Some strong year-over-year growth rates, as you can see, on this board here. And that stock is up about 1.7% in early trading, guys.

JULIE HYMAN: Thanks very much. Appreciate it, as we have a lot to consider here this morning. Emily, appreciate you bringing us some of those important numbers.