The tech giants Google and Microsoft are heading towards competition in artificial intelligence (AI) with billions in profits from their core business. Microsoft wants to play a leading role and is willing to invest in it, stressed CFO Amy Hood after presenting current quarterly figures. Google CEO Sundar Pichai promised users, among other things, better web searches thanks to AI, but downplayed the extent of the change.
Last year, the release of the text bot ChatGPT shook up the tech industry. ChatGPT can not only formulate sentences that are indistinguishable from those of a human. The software can also answer questions, summarize texts – and write screenplays, for example. At the same time, their texts are not particularly original – and often incorrect in terms of content. This is partly due to the way the program works: It collects huge amounts of data and uses this to estimate word for word how a sentence should probably continue.
Microsoft boss conjures up generational change
Microsoft entered into a pact with the ChatGPT developer OpenAI and integrates the company’s software into its products, including in the cloud. Among other things, the Windows group is hoping to break Google’s long dominance in web searches with the help of ChatGPT. Microsoft boss Satya Nadella spoke of a generational change in the business on Wednesday night.
Google managers, on the other hand, were particularly relaxed with regard to the change caused by artificial intelligence. Web search has undergone many changes over the years, said Google and Alphabet CEO Sundar Pichai. Google will be guided by the wishes of the users and its own standards for quality. Artificial intelligence is already being used in many of the group’s offerings. The use of the in-house answer to ChatGPT with the name Bard will be gradually expanded.
Despite all the AI hype, both tech heavyweights were still dependent on their traditional business areas in the past quarter. Microsoft benefited from the demand for software and cloud services. Google clearly felt the cooling of the online advertising market.
Thousands of jobs eliminated
The Internet group’s advertising revenues fell slightly year-on-year. Savings measures such as the reduction of thousands of jobs associated with severance payments and the giving up of office space also cost the parent company Alphabet $2.6 billion, because the savings effect only takes effect later.
In the core business with advertising around the web search, revenues increased by 1.8 percent to 40.36 billion dollars. YouTube’s ad revenue fell from $6.87 billion to $6.69 billion. It was the third straight quarterly decline for the video platform. According to Chief Financial Officer Ruth Porat, however, business has recently stabilized.
In the cloud business, on the other hand, revenue rose significantly from $5.82 to $7.45 billion – and the division was profitable for the first time with an operating profit of $191 million.
Thanks to the growth in the cloud business, Alphabet’s consolidated sales rose by 2.6 percent to 68 billion dollars (around 62 billion euros). Those aren’t the growth rates that investors used to be used to. The stock rose about 1.5 percent in after-hours trading after Alphabet announced a share buyback of up to $70 billion.
The bottom line is that Alphabet booked a quarterly profit of a good $15 billion, as the group announced on Tuesday. That was 8.4 percent less than a year earlier.
Microsoft with increase
Microsoft, on the other hand, increased its quarterly profit by nine percent to $18.3 billion. Sales increased by seven percent to $52.9 billion. Above all, the cloud business around the Azure platform, which sells companies computing capacity and applications on the Internet, continued to boom with a sales increase of 27 percent. Azure will continue to drive growth in the current quarter, CFO Hood said. The figures clearly exceeded market expectations. Investors allowed the stock to rise 8.5 percent in after-hours trading.
