Big tech companies kicked off the third-quarter earnings season with strong performances in cloud businesses on Oct. 24.
Investors and analysts expected resilient results from big tech companies in their cloud-based businesses, primarily fueled by the increasing demand for artificial intelligence.
A cloud is a network of remote servers worldwide used by businesses to develop, store and access data from any remote location.
Microsoft Corp. and Alphabet Inc. reported their third-quarter earnings on Oct. 24, displaying contrasting performance in each cloud-based business.
Microsoft showcased a 13% increase in revenue, equating to $56.5 billion, a 27% increase in net income totaling $22.3 billion and a 19% increase in revenue from its intelligent cloud business equating to $24.3 billion. In comparison, Google’s parent company Alphabet reported a 2.8% increase in revenue and a 7.2% increase in net income.
Additionally, Microsoft saw its cloud-based business — Microsoft Azure — grow 29%, while Google’s cloud computing business grew 22%, missing investor expectations of 26%.
“We are off to a strong fiscal year, driven by the continued strength of Microsoft Cloud, which surpassed $31.8 billion in quarterly revenue, up 24%,” Satya Nadella, chairman and chief executive office of Microsoft, said in a conference call. “With copilots, we are making the age of AI real for people and businesses everywhere. We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers.”
Microsoft Copilot is an AI-powered companion used throughout the company’s applications to provide “real-time intelligent assistance, enabling users to enhance their creativity, productivity and skills.”
Sundar Pichai, CEO of Google, noted that he was pleased with the company’s quarterly results and product momentum driven by AI. He concluded that Google would continue incorporating AI into its products, making it more helpful for everyone and that “there’s exciting progress and lots more to come.”
Additionally, Amazon Inc. reported its third-quarter earnings on Oct. 26, delivering better-than-expected results with a 13% increase in revenue and a 26% increase in advertising revenue, but a 12% growth in its cloud division, Amazon Web Services.
Andy Jassy, CEO of Amazon, emphasized that while Amazon continues to see elevated cost optimization, they are seeing the “pace of volume of closed deals pick up” and that the company is innovating and delivering rapidly to resonate with customers.
“Q3 tech season has been quite strong thus far,” Tejas Dessai, a research analyst at Global X ETFs, said in a statement reported by CNN Business. “These numbers clearly defy concerns of near-term economic weakness looming.”
Investors and analysts focused on Microsoft’s Azure growth and suggested that the company’s early investments in AI are starting to pay off by leading the competition.
“Yeah, that was pretty key [investors’ confidence in AI growth]; I think it wasn’t just the fact that we may be starting to see a bottom here for the cloud division, but actually it was the fact that those early bets Microsoft made in OpenAI and some of these AI applications are actually starting to be monetized and add to revenue,” Arjun Kharpal, CNBC’s senior technology correspondent said on an episode of CNBC’s Street Signs Europe. “And I think when people look at Microsoft and investors are looking who’s going to be the big AI winners, I think it’s quite clear that Microsoft has taken an early lead.”
