3 big tech firms released their quarterly earnings this week. 2 won the race, and 1 was left behind.
Microsoft, Alphabet (Google), and Meta (Facebook, Instagram), three of the world’s largest companies, released their quarterly earnings this week. When putting their market caps together, these three tech giants would have a larger value than Germany, the third-richest nation in the world.
However large they may be, however, their latest quarterly earnings showcase increasing competition in the tech world. Specifically, their investments and successes in artificial intelligence revealed which companies markets trust the most.
Microsoft (NASDAQ: MSFT)
The first winner of this earnings season is undoubtedly Microsoft, which remains the leading company in AI investments. Last year, Microsoft invested $10 billion in OpenAI, one of the world’s most famous startups and the founder of ChatGPT and DALL-E.
Total revenues came in at $61.86 billion compared to $60.80 billion expected, with earnings per share also beating expectations at $2.94 vs $2.82. Total profits came in at $18.30 billion.
Most of Microsoft’s growth came from Azure, its proprietary AI-based cloud service. Azure revenues grew 31% from the previous quarter, with roughly 7% of it coming from AI services.
Microsoft is proving AI can be a profitable venture, and markets are rewarding them. Microsoft shares grew 2.76% today from a 4.12% pre-market jump.
Alphabet (NASDAQ: GOOG)
Another definite winner of Q1 2024 is Alphabet, Google’s parent company. Revenues grew by 16% at $67.59 billion, beating expectations of $66.07 billion.
Until now, Alphabet was seen trailing behind Microsoft in the AI race, seemingly missing several opportunities to catch up.
Last year, Alphabet unveiled two AI chatbots: Bard and Gemini. Neither, however, seemed to gain an edge against ChatGPT, which remains the unquestioned leading AI software.
However, Alphabet’s CEO Sundar Pichai revealed in his earnings call that the company has a safe path toward profitability from AI services. Specifically, Pichai talked about a future implementation of AI in Google Search Engine.
Google Search Engine is by far the most profitable business in Alphabet, making $48.02 billion last quarter.
Alphabet’s shares rose 10.09% today from an 11.24% pre-market jump.
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Meta (NASDAQ: META)
Despite better-than-expected revenue and profit growth, Meta could be considered the loser among big tech. Facebook’s parent company turned $36.46 billion for the quarter against the $36.16 billion expected revenues.
Net income more than doubled last quarter compared to the same period last year at $12.37 billion.
However, Meta shares plunged 16% on Wednesday after extended trading, slightly recovering in the following days but still closing the week 9.33% down.
The reason markets dubbed Meta as the loser is its CEO Mark Zuckerberg’s overconfidence in apparently unprofitable sectors. At the beginning of the year, Zuckerberg called 2024 “the year of efficiency”, leading markets to hope the company would abandon risky ventures like the Metaverse.
But Zuckerberg refurbished the concept during his earnings call on Wednesday, saying the company will accelerate investments in that direction. Reality Labs, the company in charge of developing the Metaverse, reported a $3.85 billion net loss last quarter.
Markets believe in artificial intelligence. They, however, do not agree with Mark Zuckerberg’s vision of it.
