Tech giants Google and Microsoft reported earnings that exceeded expectations on Tuesday, driven by interest in artificial intelligence (AI).
The debut of ChatGPT marked a shift for these companies amidst a period of layoffs and decreasing share prices. Now, Microsoft has reversed this trend for two consecutive quarters, reaching record profits and sales.
In Q2, Microsoft reported a net profit of $20.1 billion, a 20% increase from the previous year, and sales of $56.2 billion. Despite a slower growth rate compared to the last quarter, Microsoft maintains its position as the second most valuable company globally, after Apple, with a $2.6 trillion market cap.
Over half of Microsoft's sales in the last quarter came from its cloud business, which relies on AI. Cloud sales grew by 21% compared to the previous year. Last week, Microsoft announced a $30 fee per user to enhance its Microsoft 365 product with AI, which increased its share price.
Google's parent company, Alphabet, also exceeded market expectations with its profits. Alphabet reported a Q2 net income of $18.7 billion and a total revenue of $74.6 billion. Alphabet shares rose over 6% following the earnings release, while Microsoft's shares fell by over 3%.
Despite the focus on AI, Google's main source of revenue remains digital advertising, which generated $58.1 billion in revenue. Google's cloud business also saw an increase, from $6.3 billion to $8 billion year on year.
Google continues to follow Microsoft and OpenAI in the deployment of AI products. Even though Microsoft has integrated AI into its Bing search engine, Google's search engine still holds around 90% of the global market.
In 2023, Google's share price increased as investors anticipate new revenue and markets through AI. Sergey Brin, co-founder of Google, has returned to the company to assist in the development of AI products.
