Alphabet accounts exceed expectations as Microsoft AI rivalry intensifies

Google’s parent company, Alphabet, topped market expectations in the first quarter of 2023 with a net profit of $15 billion, the company said Tuesday, in a sign the search engine giant is regaining its footing. The tech titan came under pressure due to a general slowdown in ad spending, over-hiring during the Covid-era boom and a great challenge of Microsoft in the field of artificial intelligence.

Microsoft is investing billions of dollars in OpenAI, the company that is building the technology that powers ChatGPT and has released its latest version, GPT-4. That technology, which OpenAI says can be driven by both images and text, is already the basis of a chatbot on Microsoft’s Bing search engine that is gaining more users thanks to AI adoption.

Alphabeth’s quarterly revenue hit nearly $70 billion, $1 billion more than analysts expected, and in the same three-month period that the company said it would lay off 12,000 employees, or 6 percent of its workforce. . In their results, Google announced a $2 billion charge for the expected costs of the layoffs.

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Microsoft’s results for the first three months of the year also They pleased investors Tuesday with strong sales, buoyed by their industry-leading enterprise cloud products.

The Bill Gates-founded company reported profit of $18.3 billion on revenue of $52.9 billion as cloud and artificial intelligence more than offset declines in Windows software license revenue to PC makers as sales suffer in that market.

Most of the market’s attention was on Google, which became a focus of concern when Microsoft-backed ChatGPT was launched and quickly went viral to fines last year. The Windows maker added the technology to its Bing search engine and office software.

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Since then, the search giant launched Bardyour own version of the language-based AIbut the launch was seen as clunky and has so far disappointed bystanders and company insiders, according to media reports.

An arms race over AI is expected to unfold for several years and could prove costly for tech giants as companies fear losing out quickly to rivals.

To prepare for the battle of the AI ​​wars to come, Google reorganized its AI division, placing the independently run Deep Mind subsidiary within the company in a division called Google Brain..

“Google faces the most serious challenges it has faced in a long time”

The series of scraps sent Google CEO Sundar Pichai on a rare US media tour in recent weeks to ensure the company remained an industry leader in everything from search to maps and a pioneer in AI.

Despite the obstacles, Pichai received total compensation worth more than $225 million in 2022according to a regulatory document released last week.

Indicating that the problems still haven’t gone away, Google-owned YouTube’s ad revenue fell for the third straight quarter, declining 2.6 percent year-over-year to $6.7 billion.

The struggles at YouTube came in the same quarter that its CEO Susan Wojcicki resigned after nine years, replaced by executive Neal Mohan.

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“Google beat revenue and profit expectations this quarter, but the reasons for investor optimism are modest”said Max Willens, a senior analyst at Insider Intelligence.

“Even more importart, Google’s advertising business is under threat. YouTube revenue declines again and search and other revenue increases by less than 2 percent reflect the reality that Google’s core business is facing its most serious challenges in a long time.”

Despite the deeper problems, the stock price of Alphabet has rebounded well from the lows seen before the January layoff announcements. and on Tuesday it shot up more than 4 percent in after-hours trading to $108.4.

This was still well below the nearly $150 seen in 2021, when ad revenue was rolling in.

AI and cloud computing lift Microsoft’s quarterly profit

Microsoft said its cloud computing and artificial intelligence offerings boosted its revenue and profit in the first three months of 2022. The company, which made a big bet on adopting AI technology from the creators of ChatGPT, reported profit of $18.3 billion on revenue of $52.9 billion.

“At Microsoft Cloud, we are the platform of choice to help customers get the most value from their digital spend and innovate for this next generation of AI”He said Microsoft CEO Satya Nadella.

Revenue in a business and productivity unit that includes Office 365 rose 11 percent to $17.5 billion compared with the same quarter last year, Microsoft.

Meanwhile, the Microsoft’s “Intelligent Cloud” software services, which are hosted online, rose 16 percent to $22.1 billion.as the earnings figures showed.

The increases more than offset the drops in revenue from licensing Windows software to PC makers, as sales suffer in that market.

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“The world’s most advanced AI models come together with the world’s most universal user interface, natural language, to create a new era of computing”Nadella said.

Microsoft has been pushing steadily with its AI revolution, recently announcing that it would apply the powers behind ChatGPT to its iconic Excel, Word, and Outlook programs.

The Redmond, Wash.-based giant was quick to embrace language-based AI, showing less caution than rivals despite teething problems such as chatbots giving disturbing responses or grossly inaccurate information.

Microsoft’s latest chatbot, called Copilot, puts ChatGPT-like capabilities to work in officesproducing meeting transcripts, calendar entries or PowerPoint slides almost instantly.

The central idea of ​​the new version is that generative AI, the term for ChatGPT-style capabilities, will work as an assistant for users of popular workplace software from Microsoft and will not unilaterally assume office duties.

“You could say we’ve been using AI on autopilot and With this next generation of AI, we are moving from autopilot to co-pilotNadella said at a virtual launch event.

Other tech giants are taking a more cautious approach to generative AI, fearful of the embarrassment that comes when the technology goes off the rails.

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