Microsoft’s fiscal first-quarter results in all segments beat Wall Street estimates on Tuesday (24 October) – as the growing interest in artificial intelligence (AI) played a major part in the success of its cloud computing and PC businesses.
The tech company, which invested $10bn into ChatGPT maker OpenAI at the beginning of 2023, has still not released its AI offerings in collaboration with the company.
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However, as Reuters reports, the growing interest and anticipation for its AI products has helped Microsoft’s revenue rise 13% to $56.5bn in the quarter ending 30 September. Beating most analyst targets.
Microsoft announced ‘Microsoft Copilot’ in September, an AI companion which will span across all of its products and experiences. It is due to release on 1 November.
Brett Iversen, Microsoft’s vice president for investor relation, told Reuters the growth in results has come from Microsoft’s customers anticipating its AI products.
“What AI is doing … is opening up either new conversations or extending existing conversations or getting us back in touch with customers that we maybe weren’t doing as much with,” Iversen told the publication.
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By GlobalDataThe company’s Intelligent Cloud unit, which is home to where most of Microsoft’s future AI products will be held, on the Azure cloud-computing platform, rose to $24.3bn. Azure’s revenue grew 29%.
Laura Petrone, analyst at research company GlobalData, told Verdict that Microsoft has found itself in an enviable position to capitalise on the generative AI arms race.
“It’s clear that AI is driving Microsoft’s growth and will likely continue to do so. Microsoft provides companies with a simple way to integrate generative AI tools through the Azure cloud computing platform,” Petrone said.
Adding: “The generative AI arms race is becoming hugely competitive with increasing global demand for compute power to support it, and Microsoft – thanks to its strong position in both cloud computing and AI – finds itself in an enviable position to capitalize on that.”
Ben Barringer, technology analyst at Quilter Cheviot, said that Microsoft had become “one of the AI powerhouses in the market.”
“It has strong interest in its ‘Co-Pilot’ products that integrates artificial intelligence into its products especially Office 365 products – which in themselves are performing very well – while also seeing good acceleration in its cloud computing business as it harnesses the power of AI,” Barringer told Verdict.
Google’s cloud results dissapoint, despite AI boom
The news comes as Alphabet, Google’s parent company, saw its cloud division miss estimates for third-quarter revenue on Tuesday (24 October).
Google Cloud revenue totalled $8.41bn compared to a predicted $8.64bn, striking worry in investors as competitor Microsoft’s Azure steamed ahead.
“For Google, although this was the company everyone wanted to work for with extravagant employee perks, 2023 has been the year of lay-offs and cut-backs,” Rebecca Crook, Chief Growth Officer EMEA, at software company CI&T, told Verdict.
Google’s results highlights how the AI competition could “massively threaten the search business,” Crook said.
Adding: “Whilst Google launched Bard to rival ChatGPT with much better access to data than ChatGPT, speed to market is everything, so even if Google has the best tech, it has to keep up with the pace of Microsoft otherwise it will lose market share.”
Alphabet, which has been a long-time pioneer of AI, has recently stated how the technology continues to be its focus.
Google CEO Sundar Pichai released a statement attributing Google’s overall growth in this sector to AI, despite missing expectations in Cloud.
“We’re continuing to focus on making AI more helpful for everyone. There’s exciting progress and lots more to come,” Pichai said.
