Microsoft and Google face to face! Who won the financial report disclosed on the same day?

Source: "Science and Technology Innovation Board Daily"

On Tuesday local time, the two technology giants Microsoft and Google handed over their latest "answer sheets".

As two giants facing each other in the field of AI, Microsoft and Google's AI products, number of users, performance and other indicators have been widely concerned by the market and a lot of comparisons have been made.

What are the advantages of ChatGPT and Bard? Is the revenue of cloud business highly related to AI business growing rapidly? How many users has AI attracted and how much revenue has it brought to the two giants? You can get a glimpse of it from the latest quarterly financial reports of the two.

Microsoft's cloud growth slows down and AI revenue has not yet been reflected

**Microsoft's overall revenue was higher than market expectations, but the performance of its cloud business was slightly weaker. **

The company's fourth-quarter revenue increased by 8% year-on-year to US$56.2 billion, higher than market expectations of US$55.49 billion; operating profit margin increased by 18% year-on-year to US$24.3 billion, and net profit increased by 20% year-on-year to US$20.1 billion, up The same period last year was US$16.74 billion; diluted net profit per share increased by 21% year-on-year to US$2.69, which was higher than market expectations of US$2.55.

Microsoft's capital expenditures rose from $7.8 billion in the third quarter to $10.7 billion in the fourth quarter, and company CFO Amy Hood said on an analyst conference call that Microsoft's capital expenditures for the entire fiscal year 2024 will quarter-to-quarter growth. **

In terms of cloud business, Microsoft’s intelligent cloud revenue in the fourth quarter was US$23.99 billion, an increase of 15%, higher than the expected US$23.79 billion. **Among them, the year-on-year growth rate of Azure and other cloud service business revenue after deducting exchange rate changes was 27%, which was further slowed down compared with the 31% growth rate in the previous quarter. **Microsoft blamed it on customers cutting back on spending amid economic uncertainty.

Affected by the news, after the U.S. stock market closed, Microsoft’s stock price fell sharply, falling more than 3%.

At present, the revenue brought by **AI has not yet appeared in Microsoft's financial report. **While multiple product lines are already plugged into AI programs, Microsoft's Office productivity suite, which includes AI, is not yet widely used, and after several years of increased investment, overall spending on Azure cloud services and Office applications is slowing down.

However, it is worth noting that Microsoft said that Azure accounted for more than half of its $110 billion in cloud computing sales in fiscal year 2023. **Azure OpenAI has 11,000 customers, a substantial increase from 4,500 at the end of May. **

Satya Nadella, Chairman and CEO of Microsoft, said: “Companies must ask not just how, but how quickly, to safely and responsibly apply next-generation artificial intelligence to address their greatest opportunities and challenges. We remain focused on To lead a new AI platform shift, help customers use the Microsoft Cloud to get the most value from their digital spend and increase operational leverage."

Looking forward to the performance of the subsequent fiscal quarters, Microsoft management expects intelligent cloud revenue in the first quarter of fiscal year 2024 to be 23.3 billion to 23.6 billion US dollars, and personal computing business revenue to be 12.5 billion to 12.9 billion US dollars. The revenue growth rate will be 25% to 26%, and the business growth rate will slow down further. **

Google Cloud and advertising business both exceeded expectations

Alphabet, the parent company of Google, which disclosed its financial report on the same day, was relatively exciting.

According to the financial report, Alphabet’s total revenue in the second quarter was US$74.604 billion, an increase of 7% compared with US$69.685 billion in the same period last year, and a year-on-year increase of 9% excluding the impact of exchange rate changes; according to US GAAP, Alphabet’s No. Net profit in the second quarter was US$18.368 billion, an increase of 15% compared with US$16.002 billion in the same period last year.

Among them, **Google's cloud business growth rate and advertising revenue in the second quarter exceeded expectations. **

Google Cloud is making great strides. In the second quarter, its cloud revenue was 8.03 billion US dollars, and the market expected 7.83 billion US dollars; a year-on-year increase of about 28%, and the market expected 24.8%. **Since Google Cloud achieved profit for the first time in the last quarter, it has continued to maintain profitability this quarter, with a profit of US$395 million, double the US$191 million in the previous quarter. **

The advertising business halted two consecutive quarters of decline. In the second quarter, Google’s advertising revenue was US$58.14 billion, compared with market expectations of US$57.45 billion; a year-on-year increase of 3.3%, compared with market expectations of 2.1%.

It is also worth noting that the AI arms race has not brought Google a high increase in capital expenditures. Alphabet’s capital expenditure in the second quarter was US$6.89 billion, which was higher than the nearly US$6.3 billion in the first quarter, but far below market expectations of US$8.01 billion.

Due to the bright indicators in various aspects of the financial report, Google's stock price rose sharply after the U.S. stock market closed, up more than 6%.

Thomas Monteiro, senior analyst at Investing.com, said: "As investors questioned Google's ability to keep pace with other tech giants in the AI boom, Google not only delivered excellent earnings per share, beating expectations, but also sold at a considerable pace. This is a strong indication that Google may be entering a new phase of growth. Google has finally cemented its dominance in the much-debated cloud space and now has room to expand its focus into AI.”