Both companies attribute their recent performance to a focus on AI as their dominance in the cloud market continues to expand.
AI continues to be a boon for some large adopters, with both Microsoft and Google's parent company Alphabet reporting strong quarterly growth.
Microsoft's third fiscal quarter (ended March 31) had revenue of about $62 billion, a 17% year-over-year increase for the tech giant. Meanwhile, the company's net income was $21.9 billion, an increase of 20% year-on-year. Microsoft's operating income and diluted earnings per share also increased by 23% and 20%, respectively.
Microsoft was one of the key backers of OpenAI, the company behind ChatGPT, which powered the global AI explosion. The company has incorporated his AI into many of its products, and CEO and Chairman Satyanadera attributes its recent success to this technology.
“Microsoft Copilot and the Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” said Nadella.
Microsoft's cloud business continues to perform well compared to other aspects of its business, reflecting last year's earnings report. Microsoft Cloud grew 23% last quarter, while Azure and other cloud services grew 31%.
But some people have a problem with the way Big Tech companies like Microsoft have too much control over the cloud market. Mark Boost, CEO of cloud computing company Civo, said hyperscalers profited from “anti-competitive practices” such as “a combination of attractive free credit schemes and exorbitant egress fees.” He said there was.
“A monopoly is forming that is damaging the ecosystem and ultimately destroying the cloud,” Boost said. “We must take steps to stop these harmful practices, or Big Tech’s coffers will continue to grow at the expense of our customers and the entire cloud ecosystem.”
Microsoft's Xbox division also saw strong growth, up 62% year-over-year in its most recent quarter. This was likely fueled by Microsoft's major acquisition of Activision-Blizzard, which it completed last October.
Google Cloud is on the rise
Alphabet also reported a very strong quarter, with revenue up 15% year over year to $80.5 billion. The company's net income soared to nearly $23.7 billion, an increase of 57%.
Last quarter's success appears to have spurred the tech giant to announce its first-ever dividend. The company said it plans to pay quarterly cash dividends in the future (subject to review).
Similar to Microsoft, Google Cloud also had a strong quarter, with revenue up 28% to $9.6 billion. Alphabet and Google CEO Sundar Pichai said the latest quarter showed strong performance “from search, YouTube and cloud.”
“We are well on our way through the Gemini era and there is great momentum across the company,” Pichai said. “With our leadership in AI research and infrastructure and global product deployment, we are well positioned for his next wave of AI innovation.”
Forrester senior analyst Nikhil Rai noted that the year-over-year comparison was “favorable” for the company because the 2023 quarter occurred during a period of “macroeconomic and advertiser uncertainty.”
“The results are a lagging indicator of consumer confidence rather than a leading indicator of future conditions,” Lai said.
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