Google’s parent company, Alphabet, beats market expectations with a net profit of $15 billion in the first quarter of 2023.
The tech giant has found itself under pressure due to a general slowdown in advertising spending, overhiring during the Covid-era boom, and Microsoft’s big challenges with artificial intelligence.
It had nearly $70 billion in revenue for the quarter, $1 billion more than analysts expected, and announced it would lay off 6% of its workforce, or 12,000 employees, in the same three-month period.
Microsoft’s first three months of the year also pleased investors on Tuesday, fueled by its industry-leading business cloud offering.
The company, founded by Bill Gates, reported a profit of $18.3 billion on revenue of $52.9 billion as cloud and AI offset lower revenue from licensing Windows software to computer makers.
Most of the market’s attention was on Google, which became a focus of concern when Microsoft-backed ChatGPT was released and went viral late last year. Windows makers have added this technology to their Bing search engine and office software.
The search giant has since rushed to release its own version of its language-based AI, Bard, but the release was deemed clumsy, according to media reports, and has so far disappointed observers and insiders. I’m here.
Google CEO Sundar Pichai said in an earnings call.
“We know that billions of people trust Google to give us the right information, so we will continue to test and iterate.”
The arms race over AI is expected to last for several years and could prove costly for the tech giants.
To prepare for the upcoming AI wars, Google has reorganized its AI division, placing its independently operated Deep Mind subsidiary into a division within the company called Google Brain.
– “Serious Issues” –
With the AI-enhanced Bing threat, Pichai recently took part in a rare US media tour, confirming that the company remains an industry leader in everything from search to maps to AI pioneers.
Despite the headwinds, Pichai received a compensation package worth more than $225 million in 2022, according to a regulatory filing posted last week.
Ad revenue on Google-owned YouTube fell for the third straight quarter. However, the YouTube Shorts section added to compete with TikTok saw a “significant increase in watch time.”
During the quarter, YouTube chief executive Susan Wojcicki stepped down from her nine-year position and was replaced by longtime executive Neil Mohan.
Insider Intelligence Senior Analyst Max Willens said:
“Google’s core business is facing its most serious challenges in years.”
Despite the challenges, Alphabet’s stock recovered from its lows before the January layoff announcement, jumping more than 4% to $108.4 in after-hours trading on Tuesday.
That’s still short of the nearly $150 in 2021 when advertising revenue was inundating.
Microsoft is steadily pushing the AI revolution forward, recently announcing that it will apply the capabilities behind ChatGPT to its iconic Excel, Word, and Outlook programs.
The Redmond, Wash., giant is rapidly embracing language-based AI, despite early problems such as chatbots reacting disturbingly and providing blatantly inaccurate information. We pay less attention than our competitors.
“When people use new AI capabilities, we see increased engagement with Bing and Edge,” Microsoft chief Satya Nadella said on the earnings call.
“We look forward to continuing this journey in the generational shift of the largest software category, search.”
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