Microsoft and Google parent company Alphabet presented better than expected business results on Tuesday after the stock market went live. Both companies accelerated their sales growth and reported net profits of more than $20 billion each. Both Microsoft and Alphabet highlighted that their artificial intelligence initiatives were paying off.
“We have moved from talking about AI to using AI on a large scale,” said Microsoft CEO Satya Nadella. His colleague Sundar Pichai of Alphabet said the investments in AI benefited various businesses at his company, from Internet search to the video site YouTube to its cloud computing division. He hopes to gain further impetus from the new AI model Gemini, which was presented in December.
Microsoft replaced Apple as the most valuable company in the world
Although the figures from Microsoft and Alphabet were overall better than expected, the stock market reacted cautiously. Microsoft's share price was little changed in after-hours trading, while Alphabet shares were temporarily down more than 3 percent. Microsoft has recently achieved some milestones on the stock market. The software company replaced Apple as the most valuable company in the world, and its market capitalization exceeded the three trillion dollar mark for the first time.
Overall, Microsoft reported sales growth of 18 percent to $62.0 billion for the past three months; analysts had expected an average of $61.1 billion. Microsoft benefited from the acquisition of video game manufacturer Activision Blizzard last fall. In the business with the cloud platform Azure, which is being watched particularly closely by analysts and in which AI services are also integrated, there was sales growth of 30 percent this time, which was slightly more than expected. Net profit for the entire group rose by 33 percent to $21.9 billion, and earnings per share of $2.93 were 15 cents better than expected.
Job cuts announced at both companies
Alphabet increased its sales in the final quarter of 2023 by 13 percent to $86.3 billion, analysts had predicted $85.3 billion. Advertising sales in the particularly important Internet search division grew by 13 percent, and growth accelerated again in the YouTube and cloud computing businesses, where there had been a temporary slowdown. Alphabet's net profit rose 52 percent to $20.7 billion. Earnings per share of $1.64 were 5 cents higher than expected.
Although Microsoft and Alphabet are financially robust, both companies have recently announced job cuts. Microsoft wants to cut 1,900 jobs in its video game division after purchasing Activision Blizzard. Alphabet has introduced a whole series of cuts in recent weeks, which are also expected to cost more than 1,000 jobs. Pichai wrote in a message to employees that the company must make “tough decisions” to invest in its “big priorities” this year. On Tuesday, Chief Financial Officer Ruth Porat struck a similar tone, saying Alphabet wanted to permanently reshape its “cost base” amid investments in growth areas. Microsoft and Alphabet each cut more than 10,000 jobs last year.
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