Alphabet (GOOGL) -) shares slumped lower in pre-market trading after disappointing gains in its cloud computing division offset an otherwise solid set of third quarter earnings from the tech and ad giant.
Alphabet said group revenues rose 11% from last year to $76.7 billion, a tally that topped the Street consensus forecast of $75.9 billion, as ad sales rose 9.5% to a record $59.65 billion.
Search and other revenues rose 11% to $44.03 billion while YouTube ad sales rose by an impressive 12.4% to $7.95 billion, and came in just ahead of Street forecasts.
Google's bottom line came in at $1.55 per share over the three months ending in September, compared to last year's split-adjusted figure of $1.06 per share, a tally that top Street forecasts by around 10 cents per share.
Google cloud revenues, however, were only up were up 22.5% at $8.41 billion. That was not only the slowest growth rate in more than two years but also notably shout of the 29% pace recorded by Microsoft's (MSFT) -) flagship Azure cloud offering.
Cloud division margins were also disappointing, falling by 180 basis points from the previous quarter to 3.2%
"We see this creating a near-term overhang given that Google Cloud appears to have ceded market share to Microsoft Azure (which accelerated) and that this may spur more questions whether further investment is needed for market share gains," said KeyBanc Capital Markets analyst Justin Patterson, who carries an 'overweight' rating with a $153 price target on Alphabet stock. "Big picture, we do not believe positioning in Search or AI has changed."
Google shares were marked 8.9% lower in early Wednesday trading to change hands at $126.52 each, a move that still leaves the stock up more than 22% over the past six months.
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