Image: © JeanLuc Ichard/Stock.adobe.com
Both companies attributed their recent gains to their AI focus, while their dominance of the cloud market continues to grow.
AI continues to be a boon for some of its biggest adopters, as both Microsoft and Google parent company Alphabet have reported strong quarterly growth.
Microsoft’s third fiscal quarter ended 31 March saw revenue reach nearly $62bn, an increase of 17pc for the tech giant compared to last year. Meanwhile, the company’s net income was $21.9bn, with a year-on-year growth of 20pc. Microsoft’s operating income and diluted earnings per share also rose by 23pc and 20pc respectively.
Microsoft was one of the key backers of OpenAI, the company behind ChatGPT which propelled the global AI surge. The company has brought AI into many of its offerings and CEO and chair Satya Nadella attributes the recent success to this technology.
“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” Nadella said.
Microsoft’s cloud business continues to perform strongly compared to other aspects of its business, mirroring earnings reports from last year. Microsoft Cloud grew by 23pc in the last quarter, while Azure and other cloud services rose by 31pc.
But some have issue with Big Tech players such as Microsoft gaining too much control in the cloud market. Mark Boost, the CEO of cloud computing company Civo said hyperscalers are benefitting from “anti-competitive practices” such as “combining enticing free credit schemes with excessive egress fees”.
“A monopoly is forming which is damaging the ecosystem and ultimately breaking cloud,” Boost said. “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.”
Microsoft’s Xbox division also saw a massive surge in the latest quarter compared to last year, rising by 62pc. This was likely boosted by Microsoft’s massive acquisition of Activision-Blizzard, which the company completed last October.
Google cloud on the rise
Alphabet also reported a very strong quarter, as its revenue grew by 15pc year-on-year to $80.5bn. The company’s net income surged to nearly $23.7bn, an increase of 57pc.
The success of the last quarter seems to have spurred the tech giant into announcing its first ever dividend. The company said it intends to pay quarterly cash dividends in the future – subject to review.
Like Microsoft, Google Cloud also had a strong quarter, rising by 28pc to reach revenue of $9.6bn. Alphabet and Google CEO Sundar Pichai said the latest quarter showed strong performance “from Search, YouTube and Cloud”.
“We are well under way with our Gemini era and there’s great momentum across the company,” Pichai said. “Our leadership in AI research and infrastructure and our global product footprint position us well for the next wave of AI innovation.”
Forrester senior analyst Nikhil Lai noted that the same quarter in 2023 occurred during “macroeconomic and advertisers’ uncertainty”, making the year-over-year comparisons “favourable” for the company.
“Results are more a lagging indicator of consumers’ confidence than leading indicators of what’s to come,” Lai said.
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