Google and Microsoft pleased investors on Thursday with substantial profits, above expectations, and above all optimistic outlooks on their ability to generate income from their massive investments in artificial intelligence (AI).
Alphabet, the parent company of Google, achieved a turnover of more than 80 billion dollars in the first quarter, of which it generated 23.7 billion in net profit (+57%).
Its cloud is doing particularly well: the operating profit of the remote computing branch came to 900 million – more than triple a year ago.
Microsoft, for its part, reported nearly $22 billion in profits from January to March, up 20%. Its Intelligent Cloud division (data centers, servers and remote software), saw its revenues jump 26%, its fastest pace in two years.
But the market was especially watching for signs that the investments of the two American giants in generative AI (production of texts, images and other content, upon simple query in everyday language) are starting to bear fruit.
On Wednesday, their neighbor and competitor Meta (Facebook, Instagram) disappointed Wall Street, even though it doubled its profits, by announcing higher spending in AI, which will take several years to turn into profits.
“We have clear paths towards the monetization of AI through advertising, the cloud and subscriptions,” assured Sundar Pichai, boss of Alphabet, during a conference with analysts on Thursday.
“Monetization follows”
Since the success at the end of 2022 of ChatGPT – designed by OpenAI, an ally of Microsoft – technology giants have been deploying generative AI tools at very high speed, for individuals and for businesses.
In the lead, Microsoft and Google are increasing the announcements of new language models, ever more sophisticated AI assistants and new investments in chips, servers or partner start-ups.
“We have started integrating AI-generated response previews at the top of search results,” Sundar Pichai said on Thursday.
These insights — direct, written answers to people’s questions — “allow people to access new information and ask more complex questions,” he explained. “According to our tests, people who use it use our search engine more and report greater satisfaction.”
Like Meta and Microsoft, the executive has had many questions from analysts on the evolution of spending in AI.
He said that when a new product “works well, monetization follows” and promised that the company continues to “manage headcount growth and strengthen teams in the highest priority areas.” Alphabet cut 12,000 positions at the start of 2023, and laid off a few hundred employees this year.
Increased spending
Microsoft, for its part, faces a “slightly higher demand in AI than its current capabilities,” noted Amy Hood, the IT group’s financial director.
She acknowledged that “capital spending would increase significantly” due to cloud and AI infrastructure needs, but said she expected the company’s margins to improve by two points over the year. tax 2024.
“The path to AI monetization” for Microsoft “is the clearest”, compared to Alphabet, Meta or Amazon, said Sophie Lund-Yates, of Hargreaves Lansdown, in a note.
“The group is already reaping the dividends from its billions of investments in technologies such as ChatGPT and Dall-E which offer creation capacity and hyper-personalized use” to users of Microsoft products, added Jeremy Goldman, of Emarketer.
In electronic trading after the stock market closed, Microsoft shares gained nearly 5%. That of Alphabet took more than 12%, encouraged by the announcement of the payment of a dividend.
“Things are looking good for Google,” responded Evelyn Mitchell-Wolf of Emarketer. “It’s clear that Google’s breakthroughs in AI are helping its cloud, which is a growth engine.”
“And YouTube benefited from investments in live sports, better management of the ad blocking problem and better monetization of Shorts”, the short and entertaining videos copied from TikTok, added the analyst.
The video platform’s revenues increased by 20% year-on-year, to more than $8 billion.