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Dave Paresh
Alphabet CEO Sundar Pichai is confident that Google will find a way to make money by promoting generative artificial intelligence tools. Microsoft CEO Satya Nadella says his company is already doing it.
Both corporations reported better-than-expected quarterly sales and earnings on Thursday. And the percentage of both corporations soared on the back of the results, with Alphabet even more encouraged by its new plans to buy back additional percentages and factor in its first dividend.
But the short-term fortunes of Microsoft and Google, at least as far as their generative AI efforts are concerned, is seen under the hood and in the comments of their executives. who gets the most productive percentage of the billions of dollars expected to be spent on such software in the coming years.
On a call with currency analysts on Thursday, Nadella touted that Microsoft now has 1. 8 million consumers for GitHub Copilot, a generative artificial intelligence tool that is helping engineers write software code. That’s up from 1. 3 million consumers a quarter ago.
Among Fortune 500 companies, 60% use Copilot for Microsoft Office 365, a virtual assistant that uses generative AI to help workers write emails and documents, and 65% use a Microsoft Azure cloud service that allows them to access ChatGPT’s generative AI software. Azure has a scale for virtually everyone doing an AI project,” Nadella said. Microsoft’s $13 billion investment in OpenAI has helped win over those customers.
Interest in AI helped boost profits at Microsoft’s largest unit, cloudArray, up 7 percentage points from last year, and Microsoft’s overall sales rose 17% to about $62 billion. It has also gained market share in the cloud, Nadella added. The millions of cloud contracts closed through Microsoft were up 80% in the quarter compared to the same time last year, and $10 million contracts doubled.
Alphabet’s Pichai also had milestones to boast about. He told on-call analysts that more than a million developers use Google Cloud’s generative AI tools and that 60% of investor-backed generative AI startups are Google Cloud customers. Generative AI is also driving advertising campaigns. for Google’s advertising clients.
But Pichai didn’t say how many subscriptions Google had attracted to Gemini Advanced, a $20-a-month subscription plan announced in February that supplies the company’s most complex AI chatbot.
Regarding Google’s core business, search, Pichai did not provide percentage gain figures similar to reports intended to summarize the effects of questions on generative AI. By offering more direct answers to searchers, Google may end up with fewer opportunities to run search classified ads if other people don’t finish. Less time performing additional, more subtle searches. The types of classified ads offered by Google may also want to change.
While Pichai said the tests show that users exposed to generative AI-based searches perform more searches, they are also potentially less successful for Google because the underlying generation that allows for more complex searches is more expensive than operating its long-standing systems.
Pichai expressed little fear on either front. We’re very, very confident in our ability to handle the burden of how to respond to those queries,” he said. “I’m sure we’re going to be able to manage the monetization transition here as well. That will develop over time. “
Alphabet’s total sales rose 15% to approximately $81 billion.
It spent about the same amount (about $12 billion) that Microsoft invested in infrastructure such as servers and knowledge centers last quarter. But Thursday’s earnings and comments Microsoft is further ahead in taking profits.
For now, shareholders are giving some freedom to either corporation. At Thursday’s close, Microsoft shares were up 35% over the past year and Alphabet’s shares are up 51% over the past year. They are at or near all-time highs. But if consumers continue to flock to Copilot and the outlook for Gemini and Google Search isn’t clearer, it’s possible that trend lines will soon diverge.
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