Google and Microsoft confirm that huge investments in artificial intelligence are compatible with revenues

 Google and Microsoft posted quarterly profits that exceeded expectations, providing a positive outlook on their ability to generate revenue from their huge investments in artificial intelligence.

The revenues of Alphabet, the parent company of Google, exceeded $80 billion in the first quarter of the year, including a net profit of $23.7 billion (+57%).

The performance of its cloud platform was good, as its operating profit reached $900 million, three times more than last year.

For its part, Microsoft announced profits of around $22 billion between January and March, an increase of 20%. The Intelligent Cloud platform (data centers, servers and remote programs) achieved a jump in revenue of 26%, the fastest pace in two years.

The market had been waiting for signs that the two American giants' investments in generative artificial intelligence were beginning to bear fruit.

On Wednesday, rival Meta disappointed Wall Street, despite doubling its profits, by announcing an increase in spending on artificial intelligence that will take several years to turn into profits.

"We have clear paths to generate revenue from artificial intelligence through advertising, the cloud and subscriptions," said Alphabet CEO Sundar Pichai during a conference with analysts on Thursday.

The success of the "Chat GPT" program of the "Open AI" company at the end of 2022 sparked a race in the field of generative artificial intelligence, and major companies accelerated the pace of publishing tools based on this technology for individuals and businesses.

Microsoft and Google are increasingly offering language generation tools and user assistance programs based on artificial intelligence, while announcing new investments in chips, servers or partner startups.

"We've begun integrating previews of AI-generated answers at the top of search results," Pichai said Thursday.

He explained that these answers provided by the programs to questions asked by users "allow people to access new information and ask more complex questions," adding, "We've found that people who use these programs use our search engine more and report greater satisfaction."

Similar to what Meta and Microsoft received, analysts asked Pichai many questions about increasing spending on artificial intelligence.

"Good results for any new product are followed by revenue generation," he said, promising that the company would continue to "manage headcount growth and strengthen teams in high-priority areas." Alphabet cut 1,200 jobs at the start of 2023 and has laid off several hundred employees this year.

Microsoft, for its part, is facing "somewhat higher demand for artificial intelligence compared to its current capabilities," according to Amy Hood, the company's chief financial officer.

She noted that "capital expenditures will increase significantly" due to the infrastructure needs of both the cloud platform and artificial intelligence, and noted that she expects the company's margins to improve by two points in fiscal 2024.

Sophie Lund-Yates of Hargreaves Lansdown argued that "the path to artificial intelligence revenue is clearer" for Microsoft than for Alphabet, Meta or Amazon.

Jeremy Goldman of eMarketer pointed out that "the group is already reaping the benefits of its multi-billion dollar investments in GPT and DAL cache technologies".

In electronic trading after the close, Microsoft shares were up about 5% and Alphabet shares were up more than 12%.

"Things are looking up for Google," said eMarketer's Evelyn Mitchell Wolfe. "It's clear that the company's advances in artificial intelligence are helping its cloud platform, which is a driver of growth."

She added, "The YouTube platform has benefited from investments in live sports broadcasts, which have allowed it to better manage the issue of ad blocking and generate higher revenues than those generated by short video clips."

YouTube revenues grew 20% year over year to more than $8 billion.