Microsoft and Alphabet/Google earnings statements and market forecasts have reinforced growing concerns about economic headwinds and a potential recession. Moreover, some MSPs are reporting IT product sale slowdowns, according to ChannelE2E conversations with multiple industry sources.Still, the news isn't all bad. Among the silver linings:The situation remains far worse in the hardware market, where Intel employees are bracing for potential layoffs as part of a closely watched October 27 earnings report. Multiple MSPs, meanwhile, tell ChannelE2E that they are seeing weakness in their hardware-oriented sales -- though IT project pipelines do remain strong, the service providers said.
- Demand for cloud and managed services generally remains strong, and IT project backlogs also appear strong.
- MSP valuations -- based on annual EBITDA (earnings before interest, taxes, depreciation and amortization) continue to hold up well, according to ChannelE2E conversations with buyers, sellers and deal makers.
Microsoft and Google: Quarterly Earnings, Forecasts and Economic Headwinds
Nevertheless, there are new economic and IT industry warnings signals that MSPs and channel partners should keep in mind:- Microsoft stock dropped about 6% after the company forecast somewhat slower growth for its cloud business, and continued weakness for its PC-centric Windows business. But keep in mind: The cloud software giant is still growing. Top-line revenue was $50.1 billion in Q1 of fiscal year 2023, up 11% compared to Q1 of fiscal year 2022.
- Alphabet, parent of Google, saw its stock drop about 6% after the company announced weaker-than-expected search revenues. The actual figures: Q3 revenue was $69.1 billion, up 6% compared to the corresponding quarter last year.