scorecard
  1. Home
  2. stock market
  3. news
  4. Alphabet sees $165 billion in market cap wiped after cloud business growth disappoints Wall Street

Alphabet sees $165 billion in market cap wiped after cloud business growth disappoints Wall Street

Phil Rosen   

Alphabet sees $165 billion in market cap wiped after cloud business growth disappoints Wall Street
  • Alphabet stock dropped nearly 10% Wednesday following Tuesday's third-quarter earnings report.
  • Google said cloud-computing revenue climbed 22% to $8.41 billion in the quarter, missing estimates of $8.64 billion.

Shares of Google-parent Alphabet plunged almost 10% on Wednesday, the day after reporting earnings that showed weaker than expected growth in its cloud business for the third quarter.

At its lowest mark in the trading session, Alphabet lost as much as $173 billion in market capitalization. The stock pared some of its losses to trade 9.46% lower later in the session, erasing about $165.5 billion in market value. It's the largest single-day loss in value ever for the search giant.

Even as revenue and profit beat Wall Street's expectations, Google's cloud division saw revenue climb 22.5% to $8.41 billion, below consensus estimates for $8.62 billion. Growth was also down from 28% in the prior quarter.

Scott Devitt, an analyst at Wedbush, said uncertainty in the tech giant's cloud division is what dragged the stock lower, but it shouldn't detract from the company's long-term prospects.

The Wednesday sell-off was "overdone," he said, as "investors are placing too much relative value on the company's Cloud segment which accounts for just ~11% of revenue and ~1% of operating income, versus the core advertising business which accounts for 78% of revenue, is accelerating into Q4, and beat Q3 expectations by more than enough to offset slower Cloud growth."

"Owning Alphabet for its Cloud business," Devitt maintained, "is like rooting for Michael Jordan to play baseball."

Alphabet's stock plunge comes as Microsoft shares moved in the opposite direction, climbing more than 2.8% Wednesday. The company posted a strong earnings report for the third quarter on Tuesday, and like Alphabet, beat estimates for revenue and earnings per share.

Importantly, however, Microsoft's Intelligent Cloud unit saw sales hit $24.3 billion in the quarter, above Wall Street's $23.5 billion expected. Hargreaves Lansdown analyst Sophie Lund-Yates said it's a sign that Microsoft's AI play is already paying off.

"Fewer people are splashing the cash on hardware and the software that goes with it, which is a classic symptom of the economic wheel losing steam," Lund-Yates said. "Microsoft has cloud to pick up the slack."


Popular Right Now




Advertisement