Finimize - 🥣 Taste Alphabet’s soup

What’s going on here?

Investors gave Alphabet’s results an initial A+ on Tuesday, while Microsoft got more of a middling B grade.

What does this mean?

Microsoft’s stock has rocketed nearly 50% this year, so it’s safe to say the firm was facing some pretty lofty expectations on Tuesday. But the results, while decent-ish, didn’t exactly set the world on fire – leading to a pretty low-key initial reaction. Mind you, Microsoft did manage to clock up better-than-expected revenue growth of 10% compared to the same quarter last year, and profit also outdid forecasts, jumping 20%. Plus, the company’s crucial cloud business, Azure, grew 26% – slightly ahead of expectations, but still slower than the quarter before.

Meanwhile, Alphabet’s results were met with a standing ovation. The stars of that show were YouTube, which was back in growth mode, and Google’s own cloud business – which posted impressive growth of 28%.

Why should I care?

For markets: Azure-sky thinking.

Microsoft’s main game plan involves selling its AI-boosted software, Copilot, now with a shiny new price tag of an extra $30 per user. But some fireworks might also happen in Microsoft’s cloud business, Azure. As firms start letting AI loose, they’ll need more computing power, and that’s Azure’s cue to step in. And sure, this past quarter’s 26% growth isn’t exactly crawling – but investors will be hoping for a return to the glory days when Azure used to sprint at a pace of 35% plus.

Zooming out: Taking the temperature.

Google’s advertising revenue is a bit of a barometer for the economy. See, advertising’s a cyclical business, meaning firms splurge and starve their ad spending depending on the broader state of affairs. So with Google’s ad revenue growing again after a couple of tricky quarters – thanks in no small part to YouTube – maybe pundits will consider calling time on the US economic slowdown.

What’s going on here?

China’s leaders are pulling the strings to reanimate their flagging economy, a move that gave the country’s stock market a much-needed jolt on Tuesday.

What does this mean?

China’s economic puppet masters, the Politburo, pledged a raft of measures to perk up the economy at their pivotal July meeting. The all-important property market was right at the top of the agenda, but the to-do list didn’t stop there. It also included tackling local government debt issues, making stable employment a key goal, and reinforcing domestic demand – in other words, sorting everything out. But investors know that talk is cheap, and if this one-day rally is going to turn into something sustainable, those promises will need to translate into concrete policy changes.

Why should I care?

For markets: Word-leader word search.

Economists and strategists love to play detective with major announcements, hunting for any changes in official wording. And one line was conspicuously absent from this July’s Politburo statement: “Housing is for living in.” That former mantra used to serve as a reminder that the property market isn’t a playground for speculators – a major cause of the country’s current problems. So now optimists are hoping this new tack signals a change in the government’s approach, suggesting that China’s leaders are poised to pull out all the stops to prop up the flailing housing market.

Zooming out: Cereal killer.

The prices of all sorts of raw materials from oil to wheat have started to come back to life recently. And that uptick isn’t random: it’s the result of a potent mix of continued supply disruptions coupled with Western economies exceeding expectations. Throw a potentially springier China into the equation, and you’ve got a recipe for even higher prices. So just as inflation seemed to be heading for the exit, a major rally in commodity prices could wind up inviting it to linger.