Slower Growth Will Be The 2024 Story for Alphabet, Microsoft, and Most Other Technology Companies
With respect to Alphabet/Google (GOOGL) and Microsoft (MSFT) reporting today, investors will have to sift through the AI spin to get a sense as to what is going on with Google Cloud Platform and Azure.
While both companies may be building Gen AI infrastructure at a record pace, Gen AI is not driving record revenue growth nor is it driving enormous operating efficiency that is enabling GOOGL and MSFT to lay off thousands of workers.
Any layoff announcements are a function of Google and Microsoft getting fat over the past 20 years, not AI-driven efficiencies. I have never accused Bay Area companies of being operationally disciplined.
I expect Azure and GCP Revenue growth to slow in calendar year 2024 due to fewer sales to new customers and less usage among the base given that the base has experienced headcount reductions. This will be partially offset by price increases, particularly for Microsoft.
Further, I expect organic, constant currency total revenue growth to slow for each company in calendar 2024.