Big Earnings Movers: Microsoft Jumps, Alphabet Slumps, Boeing CEO Exclusive 10/25/23

SPEAKER_1 (0:00)

What's on the horizon for financial markets?

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David Faber (0:31)

Market insight and analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Carl Quintanilla (0:37)

Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer, David Faber at Post 9 of the New York Stock Exchange. Futures are split this morning. Dow is going to benefit from a solid open for Boeing and Microsoft, but Alphabet getting a little more scrutiny today on that slowdown in Cloud, of course, Meta and IBM tonight.

A roadmap begins with Alphabet's Cloud Conundrum. The company does top estimates, but weaker than expected Cloud revenue is pressuring the stock.

David Faber (1:00)

On the other hand, Microsoft is the top gainer on the S&P so far. It is getting a big boost from faster Cloud growth and, of course, the rise of generative AI.

Boeing shows a rally in this despite a wider than expected loss in the third quarter. CEO Dave Calhoun, he's going to join us shortly. We'll be breaking down those results with him in just a few minutes.

Carl Quintanilla (1:21)

Let's go get to the tech giants in this battle over AI. Microsoft is rising in the pre-market better than expected quarterly numbers. Azure and other Cloud revenue are up 29, but Alphabet, as David said, down sharply despite its own top and bottom line beat.

Google Cloud sales coming in below consensus. Jim, some discussion about customers optimizing their spend.

Jim Cramer (1:43)

I remember when I first got into business, there would be grants on one side. That was actually retailer and the other side would be target. It always seemed to rain on grants sides never rained on the target side.

That's what this felt like to me. There's optimization going on at Google. But David, they weren't optimizing the Microsoft.

David Faber (2:04)

Right. Why is that? Probably because of their AI offerings.

Jim Cramer (2:08)

Don't you think? I think so.

David Faber (2:09)

We should explain to people what we're talking about was optimization.

Jim Cramer (2:12)

Yeah.

David Faber (2:12)

Really my understanding and I want to make sure I understand it as well is, you sign long-term contracts with your Cloud provider. Google, for example, is providing you all sorts of services. They want to keep providing you more and more. You want to spend more. Companies right now may be a little less willing to spend more, and Google or Amazon are happy to say, you know what, that three-year deal, why don't you just pay it over four years?

That optimizes the spend for the customer, but obviously has the result of not bringing the growth numbers up as much as might have been.

Jim Cramer (2:44)

But to me, there had been some lingering, I've got to tell you some skepticism about the growth of Azure.

If you were skeptical, you were wrong. Azure is the great juggernaut perhaps of this moment, because they're the company, when you add the co-pilot, they're the first company other than NVIDIA, called it's really crushing it when it comes to AI. And they're really giving you how it's used, and it's used to make you more productive. This is something that Jensen Wong and NVIDIA always said would happen. And by the way, Mark Benioff said what happened in Salesforce. We always feel that you'd be firing people. That's the opposite. There's more money being made so you can actually hire more people and do better. So it's kind of a joyous story. Alphabet had no narrative.

I mean, they're talking about Bard. David, I mean, some of the worst Shakespeare was demonstrated. They didn't brush up on their Shakespeare before, if you want to kiss me Kate.

David Faber (3:33)

They don't want to start quoting him now.

Microsoft, I mean, it's way too early to have any conclusions, but this idea that Microsoft, when it comes to generative AI, is going to own or at least have the lead with corporate customer, corporate applications is being cemented by this quarter. Whereas to your point, Jim, I mean, listen, nobody has more information about their customers than Google. You use Google Maps and search, how much they know about you. But right now, even though many expect they're going to have the lead and really own the consumer when it comes to generative AI, they aren't there yet.

Jim Cramer (4:08)