Microsoft and Alphabet have seen their quarterly profits rise thanks to growing demand for cloud based artificial intelligence. Microsoft shares rose more than 3% to $341.11. Google’s quarterly profit of US$19.7bn was driven by revenue from YouTube, advertising and cloud services. The cloud segment of Alphabet generated US$8.4bn in revenue, compared to US$6.7bn in the same period last year. Microsoft’s Azure cloud service, rivalling Amazon’s AWS and Google Cloud, reported revenue growth of 29% in the latest quarter.

• Alphabet and Microsoft’s profits grow thanks to cloud-based AI.
• Google’s quarterly profit of $19.7bn was driven by revenue from YouTube, advertising and cloud services.
• Alphabet’s cloud segment, which integrates artificial intelligence  into its services, generated $8.4bn in revenue during the quarter, compared to $6.7bn in the same period last year.

Computer giant Alphabet, the parent company of Google, revealed on Tuesday that its quarterly profits rose due to increased demand for cloud-based assisted artificial intelligence, with Microsoft shares rising more than 3% to $341.11.

Despite exceeding total earnings estimates, Alphabet‘s share price fell more than 5% to US$129.67 on Tuesday. It was clear that investors were expecting better results from Google Cloud.

In a statement to clients, Baird Equity Research analyst Colin Sebastian said that Google Cloud has not met consensus revenue expectations due to slowing growth, and I believe this is consistent with the view that newer workloads (generative artificial intelligence) will take time to grow in importance.

Google’s quarterly profit of US$19.7 billion was driven by revenue from YouTube, advertising and cloud services. Alphabet reported sales of US$76.7bn, compared to US$69bn in the same period last year.

During a call about financial results, Alphabet CEO Sundar Pichai stated that Alphabet members see artificial intelligence as a fundamental change to the platform and are excited about what opportunities it brings to their business.

Investors and consumers are closely watching how companies use artificial intelligence, and Google, Microsoft and OpenAI are seen as industry leaders in this area.

However, Alphabet is often seen as playing catch-up with Microsoft, raising concerns about whether Google’s powerful search engine will be able to keep up with advances in artificial intelligence.

Microsoft was quick to add artificial intelligence features to its search engine Bing, but search engine Google still controls almost 90% of the global market and this action poses no threat to its hegemony.

Like most large technology companies, Google saw its share price surge in 2023 as investors expected artificial intelligence to open new industries and bring in new revenues.

Insider Intelligence analyst Max Willens said that the fact that Google can exceed earnings estimates, with shares falling immediately afterwards, is a testament to Google’s dominance in the search and advertising markets. He added that cloud computing is a much tougher business than advertising, in which Google faces strong competition. While Google may ultimately succeed in monetising artificial intelligence, its cloud may not be enough to satisfy investors.

Alphabet’s cloud segment, which integrates artificial intelligence into its services, generated $8.4bn in revenue during the quarter, compared to $6.7bn in the same period last year.

Microsoft said on Tuesday that its performance in the highly controlled cloud services sector contributed to its profit growth in the latest quarter.

With net income of $22.3 billion for the July to September period, the corporation reported higher than expected profits of 27% compared to the same period last year.

The Azure cloud service, which rivals AWS and Google Cloud, is a key component of Microsoft’s artificial intelligence and cloud computing performance, which is getting everyone’s attention.

During the earnings call, Microsoft CEO Satya Nadella said that Microsoft is making the era of artificial intelligence a reality for people and businesses around the world. The company is rapidly deploying artificial intelligence in every technology layer and for every role in the business process to increase productivity.

Revenue growth from the Azure platform and other cloud services in the latest quarter was 29% year-on-year, slightly faster than the previous three months.

The company’s total sales for the quarter were US$56.5 billion, higher than expected. Microsoft shares were up 4.6 per cent in after-hours trading.