Published - October 26, 2022 @ 11:47 AM (EET)

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US equity futures fell after post-market slumps in mega-cap technology shares dampened the mood of a three-day rally on Wall Street and raised new doubts about whether this year's $5.5 trillion selloff is nearing the bottom.

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Following disappointing quarterly results from Microsoft Corp and Google parent Alphabet Inc., contracts on the Nasdaq 100 tumbled 1.8%.

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Here are some of this week's earnings reports:

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1. Microsoft Tops Profit Estimates despite Strong Dollar

Demand for cloud services remain strong

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Microsoft Corp. (NASDAQ:MSFT) posted its weakest quarterly revenue growth in five years, throttled by the surging U.S. dollar and a slump in sales of Windows software to personal computer makers.

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Sales in the first quarter, which ended Sept. 30, rose 11% to $50.1 billion, the software maker said Tuesday in a statement.

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Net income was $17.6 billion, or $2.35 a share. While both numbers topped analysts’ average estimates, revenue from Microsoft’s closely watched Azure cloud-computing services decelerated to 35%.

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Excluding the impact of the rising dollar, Azure sales rose 42%, below some predictions. Demand remained strong for cloud services, with Office 365 sales to businesses performing slightly better than expected.

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The total cloud revenue in the period rose 24% to $25.7 billion. 

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2. Google Parent Alphabet Drops after missed expectations

Bracing for tough times ahead

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After reporting earnings and revenue that missed expectations, Google parent Alphabet Inc. (NASDAQ:GOOGL) said Tuesday it would slow hiring and control expenses, signalling that it was bracing for tough times ahead as the economy falters.

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Google’s advertising juggernaut, which had largely dodged the digital-ad slowdown, is no longer immune.

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Alphabet said third-quarter sales, excluding payments to distribution partners, were $57.27 billion, compared with average analyst projections of $58.18 billion, while Net income was $1.06 per share, less than estimates.

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Shares fell more than 6% in post-market trading. Elsewhere, while Google’s cloud offering unit has yet to turn a profit, the cloud business is nonetheless viewed as one of the company’s best bets for growth as the core search business matures. 

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3. Spotify Tops Subscriber Forecasts but Sees Margin Pressure

Shares tumble as much as 10%

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Spotify Technology SA (NYSE:SPOT) tumbled as much as 10% Tuesday after the music streaming giant said profit margins may narrow this quarter due to programming costs and potential price increases in the US.

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Earlier, Spotify reported that third-quarter ad revenue increased 19% but said sales were slower than expected due to a “challenging macro environment.” The company forecast a gross margin of 24.5% in the fourth quarter and an operating loss of 300 million euros, both below consensus expectations.

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The company further reported 456 million monthly average users for the third quarter and also surpassed paid subscriber predictions, totaling 195 million. The sell-off shows how investors have become more focused on whether Spotify becomes profitable.

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Third-quarter revenue reached 3.04 billion euros.

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