AI takes me into the ringing bright distance

Late last night, two leading US high-tech corporations, Microsoft and Alphabet, reported their first quarter reports. The key performance of both competitors beat analysts’ forecasts and pleased investors, who appreciated the company’s results in a difficult first quarter. However, experts believe that perhaps not so much the results for the past period have become more important in the reporting of companies, but plans for the near future – the introduction of AI, which should become one of the main incentives for the development of their business.

Microsoft (MS) and Alphabet presented their first quarter financial statements almost simultaneously after the close of trading on the US stock exchanges. However, immediately after the publication of reports, quotes of companies began to grow in over-the-counter trading – investors appreciated that the main indicators of both MS and Alphabet turned out to be higher than analysts’ forecasts, who expected more modest results in a difficult first quarter.

Microsoft informedthat its revenue increased by 7% to $52.9 billion, while interviewees Refinitiv analysts had expected revenue of just $51 billion. Net income rose 9% to $18.3 billion and revenue per share rose 10% to $2.45, also better than forecast ($2.23). The company recorded growth in all key areas of its business, especially in cloud services (+27%), server products (+17%) and commercial software (+14%). The only notable decline was a decrease in revenue from sales of consumer versions of OC Windows (-28%), which explained global trend of declining sales of computers.

In turn, Alphabet informed on quarterly revenue growth of 3% to $69.8 billion, profits of 9% to $16.4 billion and revenue per share of $1.17. Analysts expected revenue in the region of $68.8 billion, and revenue per share of $1.07. Similar to Microsoft, Alphabet’s highest growth rates were in the cloud services segment (+28%). This made it possible to compensate for the decrease in advertising revenue on YouTube (-2.6%) and on partner sites (Google Network service, -8.3%). The total advertising revenue of the Google search service in the first quarter grew slightly, by 1.9%. On the back of strong quarterly results, the company announced the launch of a massive $70 billion share buyback program.

After the publication of the reports of Microsoft and Alphabet, their shares rose in price by 7% and 5%, respectively.

However, many experts and investors paid attention not only to the results for the past period, but also to the plans of companies in the near future, namely, the active introduction of AI, which should give a new impetus to the development of the entire business of Microsoft and Alphabet.

So, for example, Microsoft CEO Satya Nadella emphasized that “the most advanced AI models go hand in hand with the most versatile user interface in the world – ordinary language. All this opens up a new era in the computer world.” Microsoft CFO Amy Hood on a conference call with analysts informed, which expects revenue growth in the next quarter – thanks in large part to the use of AI. “As with any significant platform change, it all starts with innovation. Therefore, we are very pleased to see such a high response already at a very early stage in relation to our capabilities in the field of AI,” the top manager explained. “We will continue to invest in our cloud infrastructure, especially with the use of AI, as we need to adapt to the growing demand of our consumers . Therefore, we expect revenue growth in the near future.”

Recall that it is Microsoft invested in the developer of the sensational chat bot ChatGPT – startup OpenAI – several billion dollars. In January Microsoft started adding enhanced version of its artificial intelligence (AI) Bing search in the Windows 11 update.

In the race with Microsoft in the advanced chatbot segment, albeit with some delay, entered Alphabet with their Bard chatbot. Announcing Alphabet’s Q1 results, CEO Sundar Pichai is clear gave to understand that the company intends to focus maximum efforts on the development of modern AI technologies and their implementation in their platforms. “I outlined three main areas in this area – developing the most modern and advanced language models, improving existing products for a better experience for our users, and providing developers and our partners with tools that would allow us to take full advantage of AI together,” said the head of Alphabet. “And we have already made visible progress on all of these fronts.”

Evgeniy Khvostik