- Microsoft and Alphabet reported quarterly profits that beat Wall Street expectations.
- The CEOs of both companies said some of the gains were due to their investments in AI.
- Wedbush's Dan Ives told CNBC that this would be a “crown situation for them.”
Investors are just getting a glimpse of what the results of large-scale AI investments could be.
On Thursday, on the heels of Meta's mixed first-quarter results that caused a downturn on Wall Street, Microsoft and Alphabet Inc. just proved that there is money to be made from artificial intelligence.
Microsoft reported a profit of $21.9 billion for the quarter that ended March 31, a 20% increase from the same period last fiscal year. Google's parent company reported profits of $23.7 billion, up 57% from the previous fiscal year.
Both profit results beat analysts' expectations, and leaders at both companies say they are grateful for the AI.
Alphabet CEO Sundar Pichai acknowledged during an earnings call Thursday that a large portion of the company's first-quarter results came from Google's search engine. But the executive also highlighted the contribution of Google Cloud, with its generative AI services powered by Google's AI model Gemini.
“In the cloud, we have announced more than 1,000 new products and features in the past eight months. At Google Cloud Next, more than 300 customers and partners, including global brands such as Bayer, Cintas, and Mercedes, are excited about the AI generated by Google Cloud. Benz, Walmart, and many others,'' Pichai told investors on a conference call.
Alphabet Chief Financial Officer Ruth Porat said on a conference call that Google's cloud division had revenue of $9.6 billion, a portion of which reflects “the growing contribution from AI.”
Similarly, Microsoft said its latest quarter benefited from cloud services.
Microsoft generated $26.7 billion in revenue from its cloud products, including Azure, according to a company press release. The company said 7% of its growth from Azure is from AI.
Microsoft CEO Satya Nadella's only statement in the press release highlights the company's investment in artificial intelligence, namely Microsoft Copilot, an AI assistant in Azure.
“Microsoft Copilot and the Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” Nadella said in a press release.
While Wall Street remains hungover from Meta's first-quarter report, investors appear satisfied with Microsoft and Alphabet's quarterly results, which sent their stock prices soaring.
Wedbush analyst Dan Ives told CNBC on Thursday that the reaction was a “clear change” from what Wall Street saw on Meta 24 hours ago.
“They have a treasure trove of AI engineers and data, and now they're starting to monetize it,” Ives said of Alphabet and Microsoft. This is “a gold mine situation for them with AI,” he added.
