(Bloomberg) — Alphabet’s Google and Microsoft, which have boosted quarterly earnings with their respective established search and cloud computing businesses, are using their time with investors to see what’s next: artificial intelligence. emphasized.
Bloomberg’s most read articles
In their respective earnings calls Tuesday, the tech giants, which are becoming rivals in the race for the future of search, offered starkly different assessments of how much disruption lies ahead in the market. encouraged to trust Google’s long-standing track record as the world’s leading search engine, and saw AI as another change in the ever-evolving business. Microsoft hinted that something more dramatic was on the way.
Investors seem to like Microsoft’s argument, with Microsoft’s stock up 9.7% in long-term trading, while Alphabet’s is up less than 2%.
Until recently, Google was considered a near invincible player in the world’s dominating online search market. That changed with the arrival of OpenAI’s wildly popular chatbot, ChatGPT. Microsoft is beginning to weave OpenAI’s technology into his Bing search engine, and the partnership will give Google a chance to reinvent its core search business to enable more of the conversational exchanges generative AI enables. I’m under pressure.
Alphabet CEO Sundar Pichai emphasized in an interview with analysts that Google is investing heavily in AI, but what does this technology mean for the search advertising business that remains the lifeblood of the company? I have neglected to say what it means. He is optimistic that users will continue to value online ads even if search results show summaries constructed by large-scale language models rather than the familiar list of links that Google has long provided. showed a different point of view.
“Over the years, we have seen so many changes in search,” Pichai said. “We have evolved search, but I think we have always taken a strong and grounded approach to how advertising evolves as well.”
But Microsoft CEO Satya Nadella has suggested his company is a formidable challenger. In February, he said that the AI-powered He Bing app has quadrupled in installs since it was released. He added that Bing gained market share in the U.S. market during the quarter, but did not provide specific metrics.
Read more: Microsoft’s profit and revenue estimates based on strong cloud demand
“We look forward to continuing this journey in the process of a generational shift in our largest software category, search,” Nadella said on the company’s earnings call.
Relatively small changes in market share can generate billions of dollars in revenue. But at least in the last quarter, Google’s search business appeared to be weathering the heightened competitive threat and broader recession in the digital advertising market. The company’s revenue from search and allied businesses rose to nearly $40.4 billion in the period ending March 31, beating analyst estimates.
As Google looks to bring generative AI to search, Pichai said the company will leverage institutional knowledge. “We will be guided by data and years of experience about what people want and our high quality standards,” Pichai said. “We know that billions of people trust Google to give us the right information, so we will continue to test and iterate.”
Insider Intelligence analyst Max Willens said the company has good reason to be concerned.
“Google’s core business is facing its most serious challenges in years,” Willens wrote in a note.
Read more: Alphabet stock outperforms earnings as ad sales rebound
Google’s partnership with Android phone makers offers new opportunities for Microsoft to gain ground. But even there, Pichai suggested that Google’s long track record would win the day.
“When we work with our partners, we work hard to create a win-win experience,” said Pichai. increase.”
Bloomberg Businessweek’s Most Read Articles
©2023 Bloomberg LP
