Both Microsoft and Google’s parent company, Alphabet, reported a surge in earnings on Friday (26 April) following AI deployments and investments.
Their earnings were posted just a day after Meta’s shares fell 15% following its own earnings call, during which CEO Mark Zuckerberg stated that it would increase its AI investment to $40bn.
Shares in Microsoft and Alphabet rose 5% and 11%, respectively, following their results.
Microsoft’s revenue for the quarter rose 17% to nearly $62bn, while Alphabet recorded first-quarter revenue of $80.5bn. Following its earnings call, Alphabet’s market cap exceeded $2trn, and it announced its first-ever quarterly dividend of $0.20.
Both companies credit AI as a catalyst for their growth.
Alphabet CEO Sundar Pichai stated that his company had great momentum in its AI investments.
“Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” he said.
Microsoft’s CEO and chairman, Satya Nadella, similarly praised his company’s AI strategy and its Copilot products.
“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” Nadella stated.
Beyond AI, both companies reported revenue growth in their cloud offerings.
Alphabet’s Google Cloud also experienced revenue growth of nearly 30% to $9.6bn. Meanwhile, Microsoft Cloud recorded revenue of $35.1bn.
Microsoft stated in its earnings call that this growth was attributable to its customers seeking AI products on its Azure cloud platform.
Mark Boost, CEO of UK-based cloud service provider Civo, commented that Microsoft and Alphabet’s cloud growth was not a shock.
“The valuation shared today should be a warning call to regulators looking at the current state of the cloud market,” said Boost.
“It is clear that the hyperscalers are benefitting from anti-competitive practices like combining enticing free credit schemes with excessive egress fees, which are ultimately locking users in and preventing them from leaving,” he stated, warning that a monopoly was forming in the cloud market.
Boost called for a new approach to cloud antitrust regulation in 2024.
“It is no longer sufficient to sit on the fence. We need to see action that prevents these damaging practices. Otherwise, Big Tech’s coffers will continue to grow at the cost of customers and the whole cloud ecosystem,” he said.
