Microsoft and Alphabet Post Positive Results after Bets on AI
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The stocks of tech companies Alphabet and Microsoft jumped on Friday after they revealed investments in artificial intelligence (AI).
The stock performance last week comes amid an intense war around AI. The war for dominance in the fast-growing AI industry has continued to grow, and companies investing in this space are getting immediate revenue returns.
Despite last week’s positive performance, Microsoft’s stock is down 1% in the last 24 hours while Alphabet has dropped by 3.3% within the same timeframe.
Microsoft’s Big Bet on AI
Microsoft is one of the largest investors in the AI industry. The company has invested $14 billion in this industry, and the heavy spending is bearing fruits for the company as seen in its third-quarter results.
Microsoft surpassed Wall Street estimates in the revenues and profits reported for the third quarter. The growth in revenue and profits comes amid gains from the increased use of artificial intelligence in cloud services.
The company’s growth in revenue and profits comes despite a significant increase in capital expenditure.
According to Reuters, analysts believe that the driving factor behind this growth is the company doubling down on innovation. The tech company was among the early entrants in generative AI after its $10M investment in OpenAI, the AI Company behind ChatGPT.
During the quarter that ended in March, Microsoft reported a 17% increase in revenue to reach $61.9 billion. The revenue was a notable jump from the estimate of $60.80 billion given by Wall Street. The earnings per share also reached $2.94, higher than Wall Street’s target of $2.82.
Microsoft’s capital expenditure in the AI industry during the third quarter surpassed analyst estimates to hit nearly $1 billion. The capital expenditure during the quarter hit $14 billion.
Alphabet’s Q1 Results Show Investment in AI is Paying Off
While releasing its first quarter financial results last week, Alphabet proved that its heavy investments in the AI industry are paying off.
The Google parent company surpassed analyst estimates with a revenue growth of 15% during the quarter. The revenue growth was the fastest reported by the company since early 2022.
Alphabet has been trimming costs since 2023 amid slowed ad growth and more spending on AI. The company has also not had a successful launch of its AI products.
Revenue generated from Google Cloud, which houses the company’s AI technology, increased by 28% year-over-year to $9.57 billion. Operating income also jumped to $900 million.
In March 2024, Alphabet launched several AI products like Vertex AI targeting enterprises looking to build their own AI agents. The company is also planning to integrate AI technology into search engines to improve search capabilities.
