Run on cloud services

AI boom brings Google and Microsoft high profits

Microsoft & Google are engaged in an AI arms race.

(Bild: stock.adobe.com, Krone KREATIV)

The ongoing boom in artificial intelligence (AI) is once again giving the two leading US providers of this technology a boost. Software group Microsoft and Google parent company Alphabet both presented surprisingly strong quarterly figures on Thursday. The latter also announced the first dividend in the company's history and further share purchases worth billions.

Alphabet is reportedly planning a payout of 0.20 dollars per share. The internet group also intends to buy back additional shares worth 70 billion dollars. This and the surprisingly strong figures caused the technology sector as a whole to breathe a sigh of relief, said analyst Thomas Monteiro from online broker Investing.com. Alphabet shares rose by almost 16 percent in after-hours trading in the US.

Group turnover increased to 80.54 billion dollars in the first quarter. Revenue from the traditional online advertising business grew by 13 percent to 61.7 billion dollars. With an increase of 28 percent, the cloud division, whose computers run the Google AI "Gemini", grew more than twice as much. Alphabet CEO Sundar Pichai said it was encouraging that users were increasingly turning to AI for support when searching the internet.

31 percent increase for Microsoft Cloud
Azure's growth was even more dramatic. The turnover of Microsoft's cloud division rose by 31 percent to 26.7 billion dollars. "Demand continues to grow strongly," Brett Iversen, head of financial communications at the software company, told Reuters. "So we're making sure we're expanding our capacity accordingly."

Microsoft is therefore likely to close the gap on the global market leader among cloud providers. According to analyst forecasts, the growth of Amazon Web Services (AWS) at the start of the year was only half that of Azure. According to Rishi Jaluria from the investment bank RBC Capital Markets, the Microsoft division is benefiting from the appeal of the group's AI strategy. Amazon plans to present its figures next week.

Similar to Alphabet, Microsoft's earnings of 2.94 dollars per share also exceeded expectations. This dampened stock market concerns that the multi-billion dollar investments would not pay off. On Wednesday, Facebook parent company Meta raised its forecast for AI spending and delivered a disappointing outlook, causing the share price to plummet. Investors are increasingly asking themselves whether this technology will generate sufficient additional revenue to justify the high expenditure, wrote analysts at investment bank Jefferies.