Two technology giants, Alphabet and Microsoft, reported strong quarterly profits that beat market expectations, sending their stock prices soaring. Investors remain optimistic about their respective core businesses driven by advances in AI.
advertisementBig U.S. tech companies showed strong momentum again in the first quarter, with Google parent Alphabet and rival Microsoft both reporting quarterly earnings that beat market expectations. Alphabet's stock rose more than 10%, and Microsoft's stock rose nearly 5% in after-hours trading. The two technology giants are widely seen as the main standard-bearers for artificial intelligence (AI), bringing optimism to the field. Details of the first quarter's financial results and the performance of each main business are as follows.
Alphabet's advertising sales accelerate
Google's parent company Alphabet posted solid growth in its core business of advertising sales, driven by an improving macroeconomic environment and significant investments in AI technology. Google's advertising revenue rose 13% year-on-year to $61.66 billion (57.4 billion euros), accounting for 77% of its total revenue. The company's total revenue increased 15% year over year, marking the fastest quarterly growth in two years.
Alphabet reported earnings of $1.89 per share and revenue of $80.54, beating estimates of $1.51 and $78.59, respectively. Revenue from his two revenue segments, YouTube Ads and Google Cloud, hit $8.09 billion and $9.57 billion, respectively, exceeding market expectations of $7.72 billion and $9.35 billion, respectively. Ta. Google Cloud's revenue increased 28% year over year.
Investors cheered Google Cloud's acceleration as the segment's operating profit was $900 million, up significantly from $191 million in the year-ago period. Google Cloud remains in third place in market share behind Amazon's AWS and Microsoft's Azure, but Chief Financial Officer Ruth Porat said, “Importantly, we believe that AI will help our cloud customers.'' “They're really excited about the benefits,” he said. Google invested $12 billion in AI infrastructure in the first quarter, primarily focused on data centers. CEO Sundar Pichai expressed confidence in effectively managing the transition to profitability after these significant investments.
Other catalysts that contributed to Alphabet's soaring stock price were the company's announcement of an initial cash dividend of 20 cents per share and an $80 billion stock buyback plan.
Microsoft's intelligent cloud division revives with Azure AI integration
In the third quarter of fiscal 2024, Microsoft's core business, Intelligent Cloud, experienced a notable resurgence. The sector's revenue soared by 21% to $26.71 billion (€24.9 billion). This was primarily driven by Azure's 31% year-over-year growth. This significant growth shows that the company's strategic adoption of AI is delivering significant benefits. Notably, Azure's growth rate was previously below 30% starting in the third quarter of fiscal 2023. However, Microsoft expects Azure growth to maintain a steady pace, with growth expected to be between 30% and 31% this quarter. Analysts had expected Azure's revenue to increase 29% in both the last quarter and this quarter.
Microsoft's impressive advances in AI have overtaken Apple and claimed the title of the world's largest company by market capitalization. The company's overall sales exceeded expectations, with earnings per share of $2.94 on sales of $61.86 billion, exceeding market expectations of $282 million and $60.8 billion, respectively. In addition to the Intelligent Cloud division, both of Microsoft's other divisions are also expanding. Productivity and Business Processes revenue, which includes Office software, LinkedIn, and Dynamics 365, increased 12% year over year to $19.6 billion. Meanwhile, More Personal Computing's revenue rose 17% year over year to $15.6 billion. More Personal Computing's revenue was $15.6 billion, up 17% year over year. In particular, Xbox revenue increased by 62%. This was primarily due to the net effect of the Activision acquisition of 61 points.
This diversification and strong growth across divisions underpins Microsoft's strong market position and effective use of advances in AI. During the earnings call, CEO Satya Nadella emphasized Azure's market share growth, noting that the company is taking market share from competitors. He specifically mentioned that approximately 60% of Fortune 500 companies utilize his Copilot.
Snap and Intel diverge after announcing financial results
Snap and Intel also announced their first quarter results, but with different results. Snap's stock price soared more than 20% on the back of strong earnings and a positive outlook. By contrast, Intel's stock price plummeted nearly 8% on lower-than-expected revenue and a weaker-than-expected quarter.
