Alphabet Inc.'s Google and Microsoft Corp. both reported good profitability in the first quarter of 2023, with their search and cloud computing businesses contributing significantly to their revenues, Bloomberg reports.
During their earnings conferences, however, both firms underlined their increasing emphasis on artificial intelligence (AI), which is emerging as the next big thing in the tech sector.
AI Remains Microsoft's Edge; Google Keeps Search Lead
Google and Microsoft have been vying for the future of search, with Google historically dominating the online search market. According to available data, Google remains the clear market leader in the search engine market by a wide margin.
On the other hand, Microsoft has been incorporating OpenAI's technology into its Bing search engine, putting pressure on Google to redesign its core search business to allow for richer conversations enabled by generative AI. Microsoft even claims it can add $2 billion in revenue for every percentage point increase in search share.
Different Views on Emerging AI Technology
Bloomberg notes that Google and Microsoft expressed opposing opinions on the potential for AI to disrupt the search sector during their respective earnings calls.
Google emphasized its long tenure as the world's leading search engine and depicted AI as just another shift in its ever-changing business.
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Google CEO Sundar Pichai expressed optimism that users will continue to appreciate online advertising even if their searches yield a summary generated by a large language model.
Microsoft CEO Satya Nadella, on the other hand, said that his company is a serious competitor to Google and that something far more dramatic is in the works.
He claimed that Bing's app installations have quadrupled since the launch of AI-powered Bing in February and that Bing has gained market share in the US throughout the quarter.
Back in March, Yusuf Mehdi, Microsoft's VP for Modern Life, Search, and Devices, shared that Bing has recorded over 100 million daily active users a month after the launch of its chatbot AI.
In any case, investors appeared to prefer Microsoft's argument, as the company's shares rose 7.1% in early New York trading, while Alphabet lost 0.8%.
Alphabet Earnings Call Overview
CNBC tells us that the company reported earnings of $1.17 per share, beating expectations of $1.07 per share, and revenue of $69.79 billion, exceeding the expected $68.9 billion.
This break in a string of four straight quarters in which the company missed consensus estimates boosted Alphabet's stock by over 4% in extended trading.
In addition to its impressive financial results, Alphabet's board authorized a $70 billion share buyback.
Microsoft Earnings Call Overview
Microsoft reported revenue of $52.9 billion, a 7% increase from the corresponding period last year, with operating income of $22.4 billion, a 10% increase.
Net income also increased by 9% to $18.3 billion. Diluted earnings per share rose by 10% to $2.45.
The company's cloud business, including Azure and other cloud services, stood out, with revenue up 22% year-over-year.
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