What was the market situation for generative AI and cloud computing in the recent third quarter? This can be seen from the financial reports of some technology giants.
On the morning of October 25th Beijing time, American technology giant Microsoft and search engine giant Google's parent company Alphabet announced their quarterly results from July to September. Among them, Microsoft's cloud business grew strongly, while Alphabet's cloud business did not meet expectations, resulting in vastly different performance in the US post market. Microsoft's stock price rose 3.9%, while Alphabet fell 5.83%. If calculated based on the closing price on October 24th, Microsoft's market value is $2.46 trillion, while Alphabet's market value is $1.77 trillion.
According to financial report data, Microsoft achieved its strongest revenue growth rate in six quarters, with core performance data hitting market expectations across the board.
Microsoft's total revenue grew by 13% to $56.5 billion, with a net profit of $22.3 billion, an annual increase of 27%.
The quarterly revenue growth of Microsoft's various products varies year by year, with Azure cloud services experiencing the strongest growth rate of 29%. Other businesses stimulated by AIGC, such as Dynamic 365 and Office 365, also saw revenue growth rates of 28% and 18%, respectively. In contrast, the growth rate of Windows related products is only in single digits, while the performance of hardware devices is the most sluggish, with an annual decrease of 22%.
It can be seen that cloud business has become Microsoft's largest business, with a total revenue of 24.26 billion US dollars from related products, accounting for 43%; The revenue from productivity software business is 18.59 billion US dollars, accounting for 33%; The business revenue related to PCs, gaming consoles, and others is $13.67 billion, accounting for 24%. Among them, due to the fastest growth of cloud business during the reporting period, it has become a strong driving force for overall performance.
At the performance conference held on the same day, Microsoft CEO Nadella stated that Microsoft is injecting artificial intelligence into every layer, role, and business process of the technology stack to drive customer productivity improvement. We have more AI service deployments than any other cloud service provider, "he said.
In order to maintain Microsoft's competitiveness in AI, Microsoft Cloud Azure has provided access to OpenAI and open source models. Nadella stated that Azure OpenAI currently has over 18000 customers from organizations.
How is Alphabet's search, YouTube, cloud, device, and other business growth driven by AI? During the reporting period, Alphabet's revenue was $76.69 billion, an increase of 11% year-on-year, and its net profit was $19.69 billion, an increase of 41.5% year-on-year.
In terms of segmented business, Google's search revenue is $44.026 billion and YouTube's advertising revenue is $7.95 billion. Nevertheless, the Google Cloud business, which cannot be called the "pillar" of the business at present, has attracted more attention and is seen as the potential for future growth of technology giants.
In the third quarter, Google Cloud achieved revenue of $8.41 billion, an increase of 22% year-on-year from $6.868 billion in the same period last year, which is lower than the market expectation of $8.6 billion. It is worth noting that the growth rate in the third quarter has slowed down compared to the first two quarters of this year. In the first and second quarters, Google Cloud revenue increased by around 28% year-on-year. In fact, this is also the slowest growth quarter in eleven quarters.
Gu Geyun has two strong competitors, namely Microsoft Cloud Azure and Amazon Cloud AWS. Lee Munson, President and CIO of Portfolio Wealth Advisors, an investment company, bluntly stated that if Google wants its stock price to continue to rise, it needs to show more significant returns in its cloud business. Otherwise, Google Cloud will always be a "third tier cloud computing platform" in the minds of investors.
In fact, compared to OpenAI's ChatGPT, Alphabet launched Bard in March this year, which is seen as a key product for Google Cloud to compete with other well-known cloud service providers.
In the context of AI, "cloud warfare" seems to rely on more investment to transport "ammunition". Alphabet's capital expenditure in the third quarter was $8.06 billion, most of which was investment in technology infrastructure. Alphabet CFO Ruth Porat stated that servers are the largest component, followed by data centers, and investment in artificial intelligence computing has significantly increased.