Microsoft and Google on Thursday cut their quarterly earnings expectations as the tech giants continue to invest heavily in artificial intelligence with the promise of shaking up the way people live.
The results were welcomed by Wall Street investors, who sent Alphabet’s share price up more than 11 percent, and Microsoft’s shares rose nearly 4 percent in after-market trading.
Google parent company Alphabet reported profits of $23.7 billion on revenue of $80.5 billion, accounting for growth in cloud computing, YouTube and online search advertising.
Artificial intelligence has helped drive the Silicon Valley tech giant’s business, according to Alphabet and Google chief Sundar Pichai.
“We’re on a good track in our Gemini era, and there’s great momentum across the company,” Pichai said, referring to the Gemini artificial intelligence model that powers services on the Google platform.
“Our leadership in AI research and infrastructure and our global product footprint positions us well for the next wave of AI innovation.”
Approximately $9.5 billion in revenue was generated by Google’s cloud computing unit, compared to $7.5 billion in the same quarter the previous year.
Google also reported its first dividend of 20 cents per share.
“Things are looking good for Google,” said Emarketer senior analyst Evelyn Mitchell-Wolf.
But the analyst warned that the future of Google’s core search business is not guaranteed.
Mitchell-Wolf said Google is facing an antitrust lawsuit in the United States and that the inclusion of AI-generated content into the company’s leading search engine “will probably be the biggest change in the search advertising market since its inception.”
The gains come as Google, Microsoft, Amazon and other rivals competing in the hot space of AI face scrutiny from regulators in the United States and Europe.
The U.S. Federal Trade Commission earlier this year launched a study of AI investments and alliances as part of an effort to keep regulatory oversight from keeping pace with industry developments and keep big players from crowding out rivals in a field that promises upheaval in many areas. work.
Amazon – through its Amazon Web Services arm – Microsoft and Google, in addition to being some of the world’s wealthiest companies, are the world’s largest providers of cloud-based data centers that store and process data at scale.
Microsoft CEO Satya Nadella said that in the January-March period, sales increased by 17 percent compared to the previous year, reaching 61.9 billion dollars, and net profit increased by 20 percent, reaching 21.9 billion dollars.
Microsoft has been heavily rewarded by investors for aggressively pushing to roll out generative AI, starting with its $13 billion partnership with ChatGPT creator OpenAI in 2023.
Adoption of artificial intelligence has increased sales of key cloud services such as Azure, which has become the core of Microsoft’s business under Nadella’s leadership.
Cloud giants Amazon and Google are also looking to increase cloud sales by offering AI features to customers and prove that the AI revolution is more than just hype.
Microsoft has gone beyond OpenAI in this effort, signing partnerships with other promising AI startups like Mistral AI and investing heavily internationally.
In March, Microsoft announced that it had hired DeepMind AI and Inflection AI co-founder Mustafa Süleyman to lead its AI unit, poaching an industry heavyweight from a promising startup.
– Revolution unleashed –
The successive moves have often surprised arch-rival Google and led Microsoft to overtake Apple as the world’s largest publicly traded company.
“Microsoft’s earnings show that the company is well positioned to profit from the AI revolution it helped usher in,” said Jeremy Goldman, senior director of briefings at Emarketer.
“While monetizing AI as effectively as Google remains a challenge, Microsoft has positioned itself in the ad buying consideration space, which wasn’t the case even a few years ago.”
But Meta’s results on Wednesday were the first sign of AI fatigue.
Facebook’s parent company said its quarterly profit rose last quarter but its share price was hit by concerns about AI spending.
A potential dark cloud for AI is government regulators who are closely examining Microsoft’s ties to OpenAI and others out of fear that it is using its huge financial war chest to prevent rivals from emerging.
Britain’s competition watchdog on Wednesday became the latest to begin examining links between artificial intelligence firms and major US tech partners including Microsoft.
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