Google, Microsoft Bet Big On GAI In Q1 - And Win

Alphabet and Microsoft reported earnings on Thursday. Both had a better-than-expected Q1 2024.

Alphabet reported results for the quarter ended March 31, 2024. Google CEO Sundar Pichai said the "results in the first quarter reflect strong performance from Search, YouTube and Cloud."

Revenue from Google Search & Other areas reached $46.2 billion -- above consensus expectations of $45 billion, accelerating to more than 14.4% year-over-year versus more than 12.7% in Q4, wrote Baird Equity Research Analyst Colin Sebastian in a research note published today.

The push into generative artificial intelligence (GAI) has forced Google to follow consumer online behavior more closely, to avoid falling behind Microsoft. 

Prabhakar Raghavan, senior vice president of Google Search, told employees last month there is a need to rapidly invest in AI. And that need has changed the market, meaning the company must move faster.



Google added several GAI features to search in the quarter -- highlighted by the launch of Circle to Search, which uses highlighted words or images from a screenshot and transcribes them into a Google search. 

Alphabet’s Google, which has developed a fair amount of the underlying technology being used in AI today, announced its first-ever dividend of 20 cents per share, despite spending billions of dollars on data centers to catch up with rivals like Microsoft.

Both companies have integrated GAI into products ranging from web search to the suite of enterprise software.

Microsoft said its revenue for the quarter ending in March reached $61.9 billion from $52.9 billion -- a much better result than analysts expected.

“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry," Microsoft CEO Satya Nadella said in a statement.

During the quarter, the company introduced Surface PCs with a key for quickly accessing the Copilot chatbot. The company began selling access to the Copilot for small businesses with Microsoft 365 productivity software subscriptions. 

The company also hired Mustafa Suleyman, co-founder of artificial intelligence lab DeepMind, to run a new Microsoft AI group.

“Alphabet and Microsoft share a common goal to promote the view that generative AI is both economically viable and safe,” Gartner Vice President and Distinguished Analyst Andrew Frank told Media Daily News in an email.

“As we move past the technology’s peak of inflated expectations, I believe it’s essential that they prioritize addressing market-wide risks, both social and environmental, rather than taking a traditional competitive posture.”

Frank hopes the companies will move toward more concrete assurances that they are addressing the necessities of self-regulation alongside commercial goals.

Microsoft has been signing a series of high-profile AI deals. Earlier this week, Microsoft announced that Coca-Cola had signed a five-year, $1.1 billion contract with Azure for AI and cloud computing services. 

Coca-Cola also will test and roll out Copilot under Microsoft 365 to improve workplace productivity. The brand has been innovating with Microsoft GAI for nearly a year. 

During the past week, Microsoft introduced of a small AI model for mobile devices, which suggests the company has a better chance of competing with Google for advertising dollars in the mobile market. 

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