The Motley Fool

Big Tech stocks: here’s a look at Microsoft’s and Alphabet’s earnings

Chart showing an upwards trend, possibly in the FTSE 100
Image source: Getty Images.

I’ve said before that I’m very bullish on Big Tech stocks. Companies such as Microsoft (NASDAQ: MSFT), Alphabet (NASDAQ: GOOG), Apple, and Amazon are generating huge growth in today’s digital world, and I can’t see this changing any time soon. That’s why I’m building my own portfolio around them.

Yesterday, both Microsoft and Alphabet posted their earnings for the third quarter of the 2021 calendar year. So let’s take a look at the numbers. Are these Big Tech-ers still growing at a rapid rate?

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic… and with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. And if you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio.

Click here to claim your free copy now!

Microsoft: a flawless set of results

Microsoft’s results for the first quarter of fiscal FY2022 were excellent and have been described by CNBC’s Jim Cramer as “flawless.”

For the three months ended 30 September, revenue came in at $45.4bn, up 22% year-on-year, and above Wall Street’s estimate of $44bn. Meanwhile, operating margin hit 45% versus the consensus forecast of 42.4%. Non-GAAP earnings per share (EPS) amounted to $2.27, well above the consensus EPS forecast of $2.08.

One of the highlights for me was the growth in the company’s cloud computing division. Revenue in Intelligent Cloud amounted to $17bn, up 31% year-on-year while Azure and other cloud services revenue growth was 48% at constant currency.

Another highlight was capital returns to shareholders. During the quarter, Microsoft returned a huge $10.9bn to investors in the form of dividends and share buybacks. This was up 14% year-on-year.

Finally, it’s worth touching on CEO Satya Nadella’s comments on inflation. “Digital technology is a deflationary force in an inflationary economy. Businesses – small and large – can improve productivity and the affordability of their products and services by building tech intensity,” he said.

What he’s essentially saying here is that Microsoft can help companies in the battle against rising costs by boosting their productivity. I think that’s something to keep in mind in the current inflationary environment.

Alphabet: strong growth in cloud

Alphabet’s results for the third quarter of FY2021 were also strong. Revenue amounted to $65.1bn, up 39% year-on-year. Analysts had been expecting $63.5bn. Meanwhile, EPS was up 71% to  $27.99, easily beating the consensus estimate of $23.73.

One of the highlights for me was growth in the YouTube business. Here, revenue came in at $7.2bn, up 43% year-on-year. Encouragingly, the company did not seem to be badly impacted by Apple’s privacy changes like Facebook and Snap were.

Another highlight was growth in the cloud division. Here, revenue amounted to $5.0bn, up 45% year-on-year. During the quarter, Alphabet also generated free cash flow of $18.7bn and repurchased $12.6bn worth of stock.

Overall, it was another very good quarter from Alphabet.

I’m still bullish on these Big Tech stocks

It’s worth pointing out that both of these Big Tech stocks have had a great run over the last 12 months. MSFT is up around 43%, while GOOG is up about 70%. After these kinds of performances, there’s always the chance of a short-term pullback and that could mean investors like me nursing some losses (hopefully only short term).

However, these results from the two Big Tech companies indicate they still have plenty of momentum, I feel. So I’m going to continue to build my investment portfolio around them.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. Edward Sheldon owns shares of Alphabet (C shares), Amazon, Apple, and Microsoft. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Facebook, and Microsoft. The Motley Fool UK has recommended the following options: long January 2022 $1,920 calls on Amazon, long March 2023 $120 calls on Apple, short January 2022 $1,940 calls on Amazon, and short March 2023 $130 calls on Apple. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.