Big Tech reports strong Q1 numbers amid AI push

Technology majors Meta, Alphabet, and Microsoft unveiled their earnings for the first quarter of 2024. Artificial intelligence (AI) continued to be a major spending area for all three companies.

Let's break down the earnings reports:

Financials


Google: Google's parent, Alphabet, reported strong financial results for the first quarter of 2024. Profits reached $23.7 billion on revenue of $80.5 billion, with growth attributed to cloud computing, YouTube, and continued strength in online search advertising. Alphabet and Google CEO Sundar Pichai pointed to artificial intelligence (AI) as a key driver of the company's success.

Google also reported its first-ever dividend of 20 cents per share.

As investors cheered the Google parent announcing the dividend and a $70 billion stock buyback, the stock soared over 11% after market opened. The company breached the $2 trillion market value mark for the first time since November 2021.

Microsoft: Microsoft reported a surge in sales of 17% year-over-year to $61.9 billion, while net profit climbed 20% to $21.9 billion, which CEO Satya Nadella attributed to the company's strategic embrace of AI.

This positive performance comes after Microsoft's aggressive push into generative AI, including its landmark $13 billion partnership with OpenAI, the creator of ChatGPT, in 2023. Nadella's leadership has seen AI become a core driver of Microsoft's business, particularly through the growth of its key cloud services like Azure. The robust results pushed Microsoft's stock by 5% in after-hours trade.

Meta: Social media giant Meta Platforms reported a significant profit increase in its first-quarter earnings to $12.37 billion, more than doubling from $5.71 billion a year ago. Higher advertising revenue played a key role, with the average price of ads on Meta's platforms also rising by 6%.

Shares of the Facebook and Instagram parent dropped about 15% in extended trade, its market capitalisation plunging to about $1 trillion.

From the CEO's desk

Making investors uncomfortable and leading Meta's stock to fall, Zuckerberg admitted that projected costs and expenses for the company's AI projects will be a significant and long undertaking. "Historically, investing to build new scaled experiences in our apps has been a very good long-term investment for us and for investors who have stuck with us and the initial signs are quite positive here too," he said.

He attempted to placate investors and analysts by saying that the initial rollout of Meta AI was going well and that "tens of millions" of people have already tried it.

On the other hand, Google and Microsoft are already reaping benefits of their AI bets. "We are well under way with our Gemini era and there's great momentum across the company," Pichai said, referring to the Gemini AI model that powers services across the Google platform. "Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation."

What’s next?

Amid layoffs and its year of efficiency, Meta will be focussing on its AI projects and Llama 3 and their integration with its apps like WhatsApp and Instagram, Zuckerberg told analysts. The company will also be rolling out Meta AI in more languages and countries over the coming months.

Microsoft will double down on its AI efforts in the coming quarters, riding on Gemini and its applications. In March, Microsoft also announced that it hired DeepMind AI and Inflection AI cofounder Mustafa Suleyman to lead up its AI unit, poaching one of the industry’s key figures from a promising startup.

Despite robust numbers, challenges await Google. The company faces an antitrust case in the United States, and the incorporation of AI-generated content into the company's leading search engine "will arguably be the biggest change to the search advertising market since its inception," an analyst said.

Not just Google, but its rivals like Amazon, who are competing in the field of AI, face scrutiny from regulators in the US and Europe. The US Federal Trade Commission early this year launched a study of AI investments and alliances as part of an effort to make sure regulatory oversight can keep up with developments in the sector and stop major players from shutting out competitors in a field promising upheaval in multiple areas of business.