Google parent Alphabet, Microsoft share results: What's in it for Indian IT cos?

Google parent Alphabet reported a 28 per cent growth in Cloud segment revenues for the March quarter on year-on-year basis, which Nuvama Institutional Equities said was softer than the recent trend, as clients were focusing on optimising cloud spends amid macroeconomic headwinds.

Microsoft results

Microsoft's revenue growth, the same brokerage in an another note said, was upheld by its cloud business. Nuvama said a strong revenue growth in the cloud segment, reported by Microsoft bodes well for Indian IT services companies.

Microsoft reported a up 7.1 per cent YoY jump in revenue at $52.9 billion, which came in ahead of Street’s $51 billion estimate. Operating income rose 10 per cent YoY to $22.4 billion; EPS at $2.45 beat Street’s forecast of $2.2, it said..

"Intelligent Cloud led revenue growth, up 16 per cent YoY and 19 per cent YoY in CC. Server Products and Cloud Services revenue shot up 17 per cent and 21 per cent YoY in CC. Azure and other cloud services revenue jumped 27 per cent YoY and 31 per cent YoY in CC. Azure growth is lower than its historical trend, although still solid on such a large base. Lower Azure margin also led to decline in Microsoft Cloud gross margin," Nuvama said.

While Microsoft expects some part of the transformation deals to be substituted by cost take-out deals in the near future, continued focus on digitalisation and ‘cloudification’ should translate to strong revenue growth for Indian IT companies in the medium to long term, Nuvama said.

Alphabet results

In the case of Alphabet, Nuvama said results pertaining to hyperscalers and commentary were similar to the Indian IT Services companies, which are reporting a shift in mix towards cost-takeout deals.

It said Alphabet’s $69.8 billion Q1FY23 revenue was ahead of Street’s $68.9 per cent estimate. Operating margin came in at 25 per cent, up 110 bps QoQ, higher than Street’s estimate of 23.5 per cent, on the back of cost saving initiatives taken by the company during last quarter. EPS at $1.17 was higher than Street’s expectations of $1.06.