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Microsoft gives gloomy outlook on slowing cloud growth

Yahoo Finance's Allie Garfinkle breaks down what Microsoft's dim outlook on cloud services growth means for the broader tech industry.

Video Transcript

BRAD SMITH: Microsoft cloud growth continues to cool as customers grow cautious amid macroeconomic headwinds. What does this spell out for others in mega tech? Well, here with the details we've got Yahoo Finance's Allie Garfinkle. What are we tracking in mega-cap tech across the bow here as Microsoft has really issued kind of a warning shot, perhaps?

ALLIE GARFINKLE: Yeah, Microsoft has certainly issued a bit of a warning shot. It's been very-- I would say Microsoft has been seeking to limit expectations, Brad.

And I'd say there are three important things to note here. There's good news, bad news, and some meh news. So the good news is there is-- there were-- the results were better than expected. They came in slightly over analyst estimates on the cloud, and that's great. If you're another big tech company, though, that shows there is pressure to deliver at least solid cloud results coming forward.

Next, the bad news. Microsoft is really not optimistic about acceleration, which is that warning shot that you were talking about. This cloud business-- other stories might see that where they go, oh, OK. We are not having-- we are not-- we don't have other-- we don't have other companies that are-- this is what I'm saying. If the cloud business is slowing down, that's bad news for Microsoft, and they don't think it's going to speed up.

And lastly, if you're Amazon, you're watching those results, and you are nervous. You are saying, OK, we need to deliver AWS results here because this is a stalwart of the business. If they don't, it looks that much worse for Amazon if they can't deliver slightly better guidance and definitely at least come in over analysts' estimates.

In the end, Brad, what I'd say is there's pressure right now on cloud businesses to show resilience in really tough times.

JULIE HYMAN: And, Allie, what are you hearing from investors, from analysts right now about how pessimistic they maybe are in the wake of these Microsoft results? I mean, the stock prices today are definitely under pressure.

ALLIE GARFINKLE: I'd say what I've been hearing, Julie, has been that there's going to be a huge gulf between the bulls and the bears from here. What we're-- I think what we're going to see is we're going to see the people who really believe doubling down and the people who don't believe really doubling down.

I think that it's going to be really interesting because on the wake-- in the wake of big tech's terrible 2022, we might actually start to see even more pessimism and even more optimism against the odds. That's what I'm hearing for now.