Microsoft, Google beat quarterly revenue estimates; fake social media influencers put companies in a spot

Also in this letter:
■ Byju Raveendran in tears as crises engulfed edtech
■ India’s middle income consumers to drive ecomm growth: report
■ TechM Q1 profit drops 39%

Microsoft, Alphabet beat earnings expectations amid AI rush

(L-R) Microsoft CEO Satya Nadella and Alphabet Inc’s CEO Sundar Pichai

Microsoft rode on growth in its cloud revenue and AI-backed products to record 8% growth in its revenue for the fourth quarter of FY23, at $56.2 billion, compared with $51.8 billion in the year-ago period. The tech giant follows a July-June financial year.

Google parent Alphabet Inc’s results beat estimates as revenue for the quarter stood at $74.6 billion, up 7% year-on-year from $69.7 billion in the year-ago period.

Key highlights from Microsoft Q4 results

• Net income increased 20% YoY to $20.1 billion from $16.7 billion in the year-ago period.
• Microsoft’s Intelligent Cloud unit increased its revenue by 15% to $24 billion.
• Capital expenditure, including finance leases, rose to $10.7 billion to support cloud demand, including investments in AI infrastructure.
• “We remain focused on leading the new AI platform shift, helping customers use the Microsoft Cloud to get the most value out of their digital spend, and driving operating leverage,” Satya Nadella, chairman and CEO of Microsoft, said in an earnings release.

Microsoft shares dip: Microsoft’s shares fell 3.3% in premarket trading as the company laid out an aggressive AI-related spending plan, saying deeper investments in AI are required before gains trickle to the bottom line.

Key highlights from Alphabet’s Q2 results

• Alphabet’s net income for the quarter grew 15% YoY to $18.37 billion, or $1.44 per share, from $16 billion, or $1.21 per share in the year-ago period.
• Revenue from Google’s cloud unit increased 29% YoY to $8 billion.
• Ad revenue, which has seen a dip in the past few quarters, rose 3.3% to $58.14 billion.
• Long-serving CFO Ruth Porat will assume the newly created role of president and chief investment officer, effective September 1, 2023.
• “Our continued leadership in AI and our excellence in engineering and innovation are driving the next evolution of Search, and improving all our services,” Alphabet chief executive Sundar Pichai said in an earnings release.

Also read | AI lesson for Microsoft and Google: Spend money to make money

Snap results: Snap Inc, owner of photo messaging app Snapchat, posted a revenue of $1.07 billion for the quarter ended June, beating analyst expectations of $1.05 billion, according to IBES data from Refinitiv. Daily active users on Snapchat rose 14% on year to 397 million, beating Wall Street expectations of 394.8 million.

Fake it till you make it: Companies in a fix as influencers ‘fake’ numbers

Companies from across sectors seeking a larger social media presence are trying to fight their biggest demon – the plague of influencers with fake followers.

What’s wrong? There has been a steep surge of influencers on platforms in India, especially Instagram and YouTube. Brands need them for a better reach, but with the number of Indian social influencers pegged at 80 million, it’s hard to figure out who is genuine.

Faking it: Over half of all social media influencers in India have more than 60% inactive, non-credible or fake followers, as per a report by B2B tech platform Klug India, which works with WPP, Reliance Jio and Firstcry.com.

“There are rampant instances of individuals purchasing fake followers, synthetic bots or utilising fake human farms to artificially boost their numbers,” said Kalyan Kumar, chief executive of Klug India.

‘Low ROI’: Fake likes and followers diminish the return on investment made by brands. “Given that influencer marketing is growing into a large market, the possibility of fraudulent followers is a big problem. Beyond cost, there stands to be a significant risk on brand reputation,” said Shashank Srivastava, senior executive officer, marketing and sales, Maruti Suzuki.

Byju Raveendran in tears as crises engulfed Byju’s

As a plethora of issues continues to weigh on edtech major Byju’s, founder and chief executive Byju Raveendran continues to be in firefighting mode. According to a Bloomberg report, Raveendran broke down in tears during a call with top investors.

Inside picture: In late April, as officials raided the Bengaluru offices of Byju’s over foreign exchange violations, Raveendran paced his condo in Dubai, downing cups of black coffee and fielding calls from top investors.

“With a planned $1 billion equity fundraise from Middle Eastern investors still in limbo, Raveendran broke down in tears defending his company, according to people who attended the calls,” the report said, citing people in the know.

What’s plaguing Byju’s? Apart from the Enforcement Directorate raid, the once-high-flying tutoring startup has failed to file its financial accounts on time. Several US-based investors accused Byju’s of hiding half a billion dollars, prompting lawsuits.

Its key investors gave up board seats citing poor governance and disregard for directors’ advice. The Ministry of Corporate Affairs will soon decide whether to open a formal probe into the startup.

Read ETtech’s top stories on Byju’s

Tech Mahindra Q1 Results: Profit drops 39% on year to Rs 693 crore

IT services company Tech Mahindra recorded a consolidated net profit of Rs 693 crore for the quarter ending June 2023, down 39% from a year ago.

Financial highlights: TechM’s revenue from operations rose by 4% year-on-year (YoY) to Rs 13,159 crore in the reporting period. The revenue dropped by 4.2% sequentially in constant currency terms. Segment-wise, revenue from the communications, media and entertainment dropped 8% YoY, while that from BFSI fell 5.4% from the previous-year period. The total headcount stood at 148,297, at the end of the June quarter, down 4,103 QoQ.

Earnings snapshot: The earnings season for Indian IT companies concluded with Tech Mahindra. While the country’s largest software exporter TCS reported a 17% YoY rise in profit for the first quarter of FY24, Infosys, the second-largest, saw an 11% rise in its profit. Bengaluru-based Wipro’s profit rose 12% YoY and HCLTech saw an 8% rise in its profit.

India’s middle-income consumers may drive 45% of ecommerce growth by 2030: report

According to a report by strategy consulting firm Redseer, Indian consumers with an annual income ranging from Rs 2.5 lakh to Rs 10 lakh are projected to drive nearly half of the growth in India’s $300 billion ecommerce market by 2030. The report was released on Wednesday.

Pushing the ecomm engine: The report states that the middle-income section of consumers is expected to contribute nearly $135 billion (45%) in gross merchandise value (GMV) to the ecommerce market by 2030. Additionally, this segment is projected to account for a substantial $1.3 trillion in the overall Indian retail market.

Gen Z, Millennials to the fore: The report highlighted that in 2022, about 75% of consumers in the middle-income category were Gen Z and millennial shoppers. Gen Z, being the younger generation, showed a preference for shopping for electronics, apparel, and beauty and personal care (BPC) products, while millennials were more inclined towards value-driven products such as food, grocery, and apparel.

Today’s ETtech Top 5 newsletter was curated by Siddharth Sharma in Bengaluru and Megha Mishra in Mumbai.