Alphabet CEO Sundar Pichai is confident that Google will find a way to make money by selling access to generative artificial intelligence tools. Microsoft CEO Satya Nadella says his company is already doing it.
Both companies on Thursday reported better-than-expected quarterly sales and earnings. And share prices for both soared with the results, with Alphabet further boosted by its new plans to buy back more shares and issue its first dividend.
But the short-term fortunes of Microsoft and Google, at least when it comes to their generative AI efforts, look different under the hood and in the comments of their executives. How investors, workers and potential customers view rivals’ efforts could determine who gets the lion’s share of the hundreds of billions of dollars in spending expected to flow into such software in the coming years. years.
On a call with financial analysts on Thursday, Nadella touted that Microsoft now has 1.8 million customers for GitHub Copilot, a generative artificial intelligence tool that helps engineers write software code. That’s up from 1.3 million customers a quarter ago.
Among Fortune 500 companies, 60 percent use Copilot for Microsoft Office 365, a virtual assistant that uses generative AI to help workers write emails and documents, and 65 percent use a Microsoft Azure cloud service which allows them to access generative AI software from ChatGPT. -OpenAI creator. “Azure has become a reference point for virtually anyone doing an AI project,” Nadella said. The $13 billion that Microsoft has invested in OpenAI has certainly helped win those customers.
Interest in AI services helped boost revenue at Microsoft’s largest unit, cloud services, up seven percentage points compared with a year ago, and Microsoft’s overall sales rose 17 percent to nearly 62 billion dollars. It also gained market share in the cloud, Nadella added. The number of $100 million worth of cloud deals Microsoft landed increased 80 percent during the quarter compared to the same period a year earlier, and deals worth $10 million doubled.
Alphabet’s Pichai also had milestones to brag about. He told analysts on a separate call that more than 1 million developers are using Google Cloud’s generative AI tools and that 60 percent of investor-backed generative AI startups are Google Cloud customers. Generative AI is also powering the ad campaigns of Google’s advertising clients.
But Pichai did not say how many signups Google had attracted to Gemini Advanced, a $20-a-month subscription plan announced in February that provides access to the company’s most advanced AI chatbot.
In Google’s core search business, Pichai did not share revenue figures related to experiments to summarize query results using generative AI. By providing more direct answers to searchers, Google could end up with fewer opportunities to show search ads if people spend less time performing additional, more refined searches. The types of ads Google shows may also have to change.
While Pichai said tests show that users exposed to AI-powered generative searches are performing more searches, they are also potentially less profitable for Google because the underlying technology to power more advanced searchers is more expensive than operating its long-running systems. data.
Picahi expressed little concern on either front. “We are very, very confident that we can manage the cost of how to address these inquiries,” he said. “I feel comfortable and confident that we will be able to manage the monetization transition here as well. It will develop over time.”
Alphabet’s total sales rose 15 percent to nearly $81 billion.
It spent about the same amount (about $12 billion) that Microsoft invested in infrastructure like servers and data centers last quarter. But Thursday’s results and commentary suggest Microsoft is further along in turning a profit.
For now, shareholders are giving both companies room to maneuver. As of Thursday’s close, Microsoft shares are up 35 percent over the past year and Alphabet’s are up 51 percent over the past year. Both are at or near all-time highs. But if customers continue to flock to Copilot and the outlook for Gemini and Google search doesn’t become clearer, the trend lines could soon diverge.