Google-parent Alphabet's cloud division missed estimates for third-quarter revenue Tuesday as an uncertain economy and high interest rates forced companies to trim their budgets.
Fears of a slowing global economy have prompted companies to curb spending on cloud-related services, including expensive AI tools, which has slowed revenue growth at Google's cloud unit to 22.5% in the third quarter, from 28% in the prior three-month period.
By contrast, revenue from Microsoft's Intelligent Cloud unit, which houses the Azure cloud computing platform, grew to $24.3 billion, compared with analysts' estimate of $23.49 billion, LSEG data showed. Azure revenue rose 29%, higher than a 26.2% growth estimate from market research firm Visible Alpha. Microsoft shares rose 5% after hours.
While advertising spending has been strong in some sectors such as retail and travel, industry executives and analysts have noted a pullback in budgets in some areas, affecting Alphabet's major source of revenue. Alphabet reported a net profit of $19.69 billion for the July-Sept. period, compared with $13.91 billion a year earlier.
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