Microsoft search advertising revenue declined by 10% year-over-year, and analysts say it has an impact on Google.
Microsoft reported a continued decline in its guidance for the next quarter, based on the tech giant's first fiscal quarter earnings it published Tuesday.
A continued slowdown in Microsoft search advertising revenue is expected and could negatively affect Google parent-company Alphabet, which presents its earnings on Thursday.
For December quarter earnings, Microsoft CFO Amy Hood said “in search excluding TAC, we expect revenue to decline in the mid to high single-digit range” during a call with Microsoft investors Tuesday. That suggests a decline of 7% to 9%.
Google’s search engine has more users than Microsoft’s Bing, but the companies produce similar trends in search advertising revenues.
Microsoft’s search advertising revenue last quarter dropped by 18% as customers spent less on ads. This excludes traffic acquisition costs.
Google’s second-quarter revenue from search and other on-site ads (minus YouTube) fell by about 10% from the year-ago quarter, from $23.64 billion to $21.32 billion.
Microsoft’s search advertising revenue, without traffic acquisition costs, rose by 1% in the quarter that ended Mar. 31, which almost reached the start of the pandemic.
Alphabet posted a 9% increase in revenue from search and other (minus YouTube) revenue, which rose from $22.54 billion in 2019 to $24.50 billion in 2020.
Microsoft's cloud computing service
The Microsoft Azure Orbital has been introduced as the newest cloud computing service at the company’s Ignite conference in September.
Microsoft Azure Orbital connects satellites directly to the cloud computing network. It will start in a “private preview” to a certain group of Microsoft users.
CNBC reported earlier this month about Microsoft’s plans to rival the Ground Station service that is accessible through Amazon Web Services. Amazon and Microsoft are the two biggest providers of cloud infrastructure.
“With access to low-latency global fiber networks and the global scale of Microsoft’s cloud services, customers can innovate quickly with large satellite datasets,” Yves Pitsch, a principal product manager at Microsoft, wrote in a blog post. “The cloud is central to both modern communications scenarios for remote operations and the gathering, processing, and distributing the tremendous amounts of data from space,” she wrote.
The satellite companies that signed up for Azure Orbital were Amergint, Kratos, Kongsberg Satellite Services, and Viasat as partners.
Microsoft's earnings during the pandemic
In July, data showed that Microsoft’s revenue soared amid the coronavirus pandemic, exceeding the predictions of analysts for the latest quarter.
Microsoft (MSFT) posted $38 billion in revenue for the three months ended in June. This is a 13% increase from the same period in the prior year and higher than the $36.5 billion that Wall Street analysts had predicted.
The quarter’s earnings were $1.46 per share, defeating analysts’ forecast of $1.34 share.”The last five months have made it clear that tech intensity is the key to business resilience,” CEO Satya Nadella said in a release. “Organizations that build their own digital capability will recover faster and emerge from this crisis stronger.”
The coronavirus pandemic forced many people to work from home, and this has propelled the demand for Microsoft’s “intelligent cloud,” “more personal computing” and “productivity and business processes” divisions.
Investors may be concerned about slowing growth in its crucial Azure cloud business, which competes with market leader Amazon Web Services. Azure sales grew 47% during the second quarter, a slowdown from the 59% year-over-year growth it reported during the previous quarter.
Microsoft’s operating expenses rose by 13% during the quarter. It covers a $450 million charge associated with the plan the company announced last month to shut down all 83 of its brick-and-mortar retail stores.
