Your AI investments benefit Google and Microsoft

Microsoft’s revenue for the October-December period increased 18% year over year (archives). KEYSTONE/AP/Joan Mateu Parra sda-ats

This content was published on January 31, 2024 – 00:02


Google and Microsoft ended 2023 with revenues and profits above expectations. This is due, in particular, to its enormous investments in artificial intelligence, at the service of its traditional activities.

Alphabet reported more than $86 billion in revenue for the fourth quarter of 2023, a 13% year-over-year increase. The world’s number one in online advertising generated 20.7 billion in net profits (+52%) according to its quarterly results press release published on Tuesday.

Sundar Pichai, the head of the Californian group, said he was “pleased with the continued strength of online search and the growing contribution of YouTube and the cloud”, guaranteeing in the press release that his two platforms “are already benefiting from our investments and our AI innovations.

Microsoft also attributed its performance to this technology that has fascinated the entire world since the emergence of generative AI a year ago. Its turnover stood at 62 billion dollars in the period from October to December (+18%), for profits of almost 22 billion dollars, an increase of a third in one year.

Its cloud business particularly stood out, with 20% year-on-year growth. It is responsible for almost 42% of the company’s revenue. “We have gone from the period when we talked about AI to a period where it is now operational on a large scale”, commented CEO Satya Nadella, quoted in the press release.

New layoffs

After a year marked by large-scale social plans, inflation, a historic antitrust trial for Google and intense competition in generative AI, the two IT groups are starting 2024 in a better position, despite having recently announced further job cuts .

Sundar Pichai said he “had difficult decisions to make” to find ways to make significant investments, especially in artificial intelligence, without providing a total number. At Microsoft, around 1,900 people will leave the Xbox console subsidiary and game publisher Activision Blizzard, acquired last year, or around 9% of the 22,000 employees allocated to video games.

The two American groups are involved in a frantic race to develop and deploy computer programs capable of producing text, sounds and images upon simple request in everyday language. They are one of the few companies with the proprietary computing and storage capabilities needed to run generative AI models.

Thanks to its large investments in OpenAI, creator of ChatGPT, Microsoft came out ahead, but Google defended its still very dominant position in online search tooth and nail. During a conference call with analysts, Sundar Pichai indicated that Google’s new AI model, Gemini, is already reducing wait times for results by 40% (in English and in the United States)

“Thanks to generative AI, we are able to answer a wider range of questions,” he said. “Users find it particularly useful for more complex questions, such as comparisons and longer queries.”

Disappointed investors

Bing, Microsoft’s search engine, hasn’t really gained ground, but the Redmond group, which controls almost half of OpenAI’s capital, is still riding the wave of generative AI. Its market capitalization recently surpassed 3 billion dollars on the New York Stock Exchange, dethroning Apple as number one in the world.

But the generative AI craze also raises a lot of concern about its potential abuses. The American competition authority (FTC) has just launched an investigation into the partnerships between Microsoft and OpenAI, and those between Google and Amazon with a competing start-up, Anthropic.

Investors expect even higher returns on investments. Alphabet shares lost more than 5% during electronic trading after the stock market closed on Tuesday.

“Google’s advertising revenue reached a double-digit growth rate for the first time since the second quarter of 2022, but this was not enough to meet analyst expectations. Next quarter, Google will turn to Gemini to reverse perceived weakness,” commented Evelyn Mitchell-Wolf of Insider Intelligence.

YouTube saw $9.2 billion in revenue (+15.5% year-over-year) during the holiday season, and paid subscriptions (music and/or video streaming) now generate $15 billion per year for YouTube. Google.

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