Google and Microsoft surpass expectations as AI competition intensifies.
Alphabet, the parent company of Google, exceeded market expectations with a net profit of $15 billion in the first quarter of 2023, signaling a rebound for the search engine giant. Despite challenges from a slowdown in advertising spending, over-hiring during the Covid-19 pandemic, and competition from Microsoft’s Artificial Intelligence (AI), Google’s revenue came in at almost $70 billion, a billion more than what analysts had predicted. Google announced it would lay off 12,000 staff, or 6% of its workforce, during this period.
Microsoft’s first-quarter results were also impressive, with the tech giant reporting a profit of $18.3 billion on revenue of $52.9 billion. Its Business Cloud products, in particular, drove growth, even as revenue from licensing Windows software to computer makers dropped due to declining sales in that market.
Despite Microsoft’s success, Google remains the focus of market attention, given the threat posed by Microsoft-backed ChatGPT, which quickly went viral after its release. Microsoft has integrated the technology into Bing search and office software. Google has since launched its own language-based AI, Bard, but the release was viewed as clumsy and underwhelming by observers and insiders, according to media reports.
To prepare for the expected AI arms race, Google has reorganized its AI division, bringing DeepMind under Google Brain. However, competition in this field is expected to be fierce and costly for Tech Giants.
During an earnings call, Google Chief Sundar Pichai acknowledged the importance of incorporating generative AI advances to enhance search capabilities. He also stated that Google would test and iterate its products carefully, given the trust billions of people place in the company to provide reliable information.
Google-owned YouTube faced some challenges, with its advertising revenue dropping for the third consecutive quarter. However, its new YouTube Shorts section, created to compete with TikTok, experienced strong watch-time growth. Meanwhile, Susan Wojcicki, YouTube’s chief for the past nine years, stepped down, with Neal Mohan taking her place. Despite the headwinds, Pichai’s compensation package for 2022 was worth more than $225 million, according to regulatory filings.
