Both Alphabet and Microsoft announced revenue growth of 7% and 8% respectively in their third quarter earnings yesterday (25 July).
Described as a “solid close” to the fiscal quarter by Microsoft’s managing director and CEO Satya Nadella, the ubiquity of AI amongst Microsoft’s services was attributed to most growth the company saw according to a transcript of the earnings call.
Go deeper with GlobalData
Stating that almost every client asks after the integration of AI, Nadella stated that Azure’s OpenAI service saw “great momentum” with “nearly 100 new customers added every day this quarter.”
Microsoft’s revenue in Productivity and Business Processes was recorded at $18.3bn, an increase of 10%, with Office 365 commercial products seeing a revenue growth of 15%.
This increase was linked to Microsoft’s integration of its Copilot AI for Office 365 subscribers.
In the earnings call, Nadella claimed that the Copilot service had already been rolled out to “600 paid customers through [Microsoft’s] early access programme” and that feedback from these companies was that the service was a “game changer for employee productivity”.
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By GlobalDataAlphabet’s Google Cloud, including Google Workspace tools, saw a 28% increase in revenue.
Speaking on this momentum in Google Cloud and Workspace, Alphabet’s CEO Sundar Pichai credits Google’s continued “leadership in AI”.
Earlier this year, Google released its Duet AI software for preorder. The software, which utilises generative AI within its productivity and workspace apps, has been described as an “effort to keep pace” with Microsoft’s Copilot efforts.
AI also impacted revenues outside of workplace and productivity services.
Microsoft registered an 8% increase in revenue for search and news advertising services, whilst Alphabet’s Google search services lagged slightly with a 4.7% increase. Google’s advertising revenue raised by 3.3%, from $56bn to $58bn.
This quarter was the first in the financial year that Microsoft introduced AI features into its Bing search engine. These features include a visual search ability in Bing Chat, as well as Bing Image Creator.
Nadella claims that over “750 million images” have been created by users so far on Bing Image Creator, a figure that Microsoft believes will increase.
Overall, both Microsoft and Alphabet have seen AI boost revenues in productivity and search services but the longevity of such a boost is still up for speculation.
Speaking on the impact of AI in revenue, principal analyst at GlobalData, David Bicknell, stated that both Microsoft and Alphabet “are taking steps to prepare their businesses for the growing demand for AI.”
Such preparation, Bicknell explains, “involves higher spending on data centres to support the expected demand for generative AI as their clients embrace the technology.”
Whilst Bicknell believes it is too early to say exactly how generative AI will continue to affect future revenue results, AI “is likely to be significant, and it is also likely to be a boost to both companies’ cloud services.”
