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Microsoft, Google are slow with new hires; Facing Spending Pressure

Even as the world’s tech companies face difficulties, quarterly updates from Microsoft and Google indicate increasing pressure on digital advertising spend for corporate IT budgets and chips for industrial machines. The companies said their headcount growth will be minimal during the current quarter of December 2022.

Alphabet has delivered disappointing results for all portfolios. The search and other related activities, the company’s financial engine, generated revenue of $39.54 billion in the third quarter, compared to analyst estimates of $40.87 billion. Google Chief Business Officer Philipp Schindler said some advertisers are cutting back.

Microsoft’s first quarter revenue ended September 30 increased 11 percent to $50.1 billion. Net income was $17.6 billion, or $2.35 per share. According to a Bloomberg survey, analysts had estimated first-quarter revenue of $49.6 billion and earnings of $2.29 per share. Amy Hood, Microsoft’s chief financial officer, said demand for cloud services remained strong, with Office 365 sales to businesses performing slightly better than expected, and the majority of major customers who signed up for Microsoft 365 licenses for the chose a more expensive version.

However, Microsoft issued a lackluster forecast for revenue growth in its Azure cloud computing services business, a closely monitored measure of business demand, causing stocks to falter in late trading. Previously, Microsoft posted its weakest quarterly revenue growth in five years, held back by the rising US dollar, declining PC demand and faltering advertising revenue. As the global economy teeters on the brink of recession, Windows software sales to PC manufacturers have fallen 15 percent in the recent period.

Google Chief Financial Officer Ruth Porat said she expects staff growth in the fourth quarter to fall by more than half compared to the prior period, while Microsoft Chief Financial Officer Amy Hood said staff growth in the current quarter will be minimal.

According to recent media reports, Microsoft has laid off nearly 1,000 employees in various divisions of the company. The move was yet another example of major tech companies shedding jobs after previously switching to slow or freeze hiring as the broader economy cools.

“Like all companies, we regularly evaluate our business priorities and make structural adjustments accordingly. We will continue to invest in our business over the coming year and hire people in key growth areas,” Microsoft said.

Google CEO Sundar Pichai has also previously said, while explaining cost savings, that the company is “taking a little more responsibility due to one of the toughest macroeconomic conditions of the past decade”. He added that the company needs to have a long-term view due to circumstances like these.

He said this while answering questions from employees at an all hands meeting this week. Pichai faced tough questions from employees about things like cutting travel and entertainment budgets, productivity management and potential layoffs.

(With input from agencies)

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