“The S&P 500 and Nasdaq experience a significant downturn as Google’s unexpected slide sparks concern over the tech giant’s future, leaving investors on edge.”
Alphabet (GOOGL) and Microsoft (MSFT) stocks experienced divergent paths after reporting their quarterly earnings on Tuesday night. While Microsoft’s Intelligent Cloud surpassed expectations, Alphabet’s cloud unit disappointed investors. However, the focus remains on how artificial intelligence (AI) is driving growth within these tech giants.
During Alphabet’s earnings call, CEO Sundar Pichai mentioned the company’s “a lot of interest in AI” for the cloud segment. However, revenue growth for this area continued to slow down sequentially in Q3. On the other hand, Microsoft saw sequential growth in cloud revenue, with 3 percentage points attributed directly to AI.
Microsoft CFO Amy Hood highlighted the improvements made in Azure and Microsoft 365 gross margins, emphasizing the pace at which they are delivering AI revenue. Both Microsoft and Google reported increased capital expenditures related to AI, but it was Microsoft’s ability to directly attribute revenue to AI that excited Wall Street analysts.
“The trend is now your friend,” wrote Evercore ISI’s Kirk Materne. “AI-Powered Azure acceleration highlights a strong fiscal first quarter and the AI story only gets stronger in the calendar year 2024.”
This divergent performance led to a more than 4% rise in Microsoft shares on Wednesday morning, while Alphabet experienced a decline of more than 8%.
Overall, the market continues to closely monitor how AI adoption and implementation impact the growth trajectory of big tech companies like Microsoft and Alphabet.