Alphabet (Google's parent company), Meta and Microsoft, which can be described as the three giants of AI in the United States, have all handed over their stage test results, and unlike the impression formed by the outside world in the previous paragraph, Google's stock price has risen sharply after the earnings report, and Meta, which has won a piece of heart by Llama 3, has evaporated 1.6 trillion overnight.
Only Microsoft continued to exceed expectations, looking at the other two unreliable opponents and smiling slightly, taking back the first place in the world's market capitalization.
Google: Profits surged by 6%, the first dividend in history, and rose 15% after hours to a new high
Google, the big brother who is often stolen the limelight by peers on various occasions and is known as the "AI Wang Feng", has finally raised his eyebrows this time.
Not only did the Q1 revenue, advertising and cloud businesses accelerate growth, but they also strongly crushed various indicators, rising more than 15% after hours, and announced the first dividend and $70 billion share repurchase plan. After the earnings report, Google's market capitalization soared by $300 billion, making it the world's fourth-largest publicly traded company after Microsoft, Apple and Nvidia.
In the quarter, Google's parent company Alphabet had total revenue of $80.54 billion, much higher than the market expectation of $79.04 billion, a year-on-year increase of 15%, the fastest growth rate in two years. Net income jumped 57% year-over-year to $23.7 billion, and diluted earnings per share were $1.89, up 61.5% from $1.17 a year earlier.
This is despite the fact that AI capital expenditures of $12 billion in the quarter exceeded expectations by $1.7 billion due to bets on large language model Gemini training and infrastructure investment. Closely related to AI, the growth of the cloud business, which is regarded as Google's next growth engine, is still accelerating rapidly. First-quarter revenue rose 28.4% year-over-year to $9.6 billion, beating analysts' expectations of $9.37 billion and doubling overall revenue growth for several consecutive quarters. Although it ranks third in the cloud computing market share and is still trying to catch up with Amazon and Microsoft, it is finally on the right track to turn losses into wins.
"We have released more than 1,000 new products and features in the cloud computing space in the last 8 months. At Google Cloud Next, more than 300 customers and partners talked about their AI success on Google Cloud, including global brands such as Bayer, Mercedes-Benz, Walmart, and others. Google CEO Sandel Pichai said during the earnings call.
And the credit still goes to the AI. Like Microsoft, more and more enterprises are looking to deploy AI workloads on the public cloud, and Google Cloud is offering customers a variety of generative AI services through the Gemini model. Recently, Google also launched a new Arm-based CPU, "Axion", which aims to improve cloud computing efficiency and reduce operating costs, further strengthening Google's competitiveness in the cloud market. CFO Borat highlighted that "AI is making a growing contribution" to sales across Google's cloud division.
Pichai agrees that the AI transformation is a "once-in-a-lifetime opportunity" and that the company is racing against time to integrate this technology across the business. At Google's cloud conference earlier this month, everything revolved around generative AI, further opening up and optimizing Gemini 1.5 Pro, and officially launching its most powerful and scalable AI accelerator, TPU v5p.
In addition, the core advertising business also improved steadily during the quarter. Total revenue was $61.6 billion, up 13% year-over-year. Google's search and other advertising revenue was $46.2 billion, and YouTube's advertising revenue was $8.1 billion, both of which achieved double-digit growth.
However, for Google, which is still positioned as a "search giant" in the market, the boost of generative AI may be a double-edged sword: on the one hand, Google is using AI tools such as Gemini to explore new revenue channels such as ad placement, independent subscription services and corporate licensing to adapt to market changes and needs. On the other hand, improving the generative search experience can impact the profitability of the original ad. At the same time, AI search engine rookies represented by Perplexity also face potential challenges.
In fact, compared with Microsoft and Meta, Google has not had an easy time in the past few months. First, Gemini's image generation feature was forced to withdraw from the market due to racial discrimination, which once sparked controversy over whether Pichai was suitable for Google's CEO. After a large severance pay for layoffs, another 50 employees were fired this week to protest the company's cloud computing contract with Israel, sparking internal unrest.
Amid controversy and challenges, this beautiful financial report came at the right time. Not only has it greatly boosted market confidence, but it also shows that Google has found the right direction in the AI era. With the recent restructuring of the artificial intelligence department and a greater focus on product speed, Google's performance in the second half of the year is still expected.
Meta: AI drove advertising soaring, Q1 revenue broke records, and Xiaozha scared 1.6 trillion yuan in one sentence
After a "year of efficiency" of business focus adjustment, department restructuring, entry into artificial intelligence, and layoffs and cost reductions, Meta made a beautiful comeback with $40.1 billion in revenue in the last quarter's financial report. Shares have soared 140% over the past 12 months, far outpacing Google's 50% and Microsoft's 35%.
In Q1 2024, the social media giant, which has just released a new generation of open source model Llama3, continued to reap the brightest first-quarter results ever, with revenue and earnings higher than Wall Street expectations.
According to the data, Meta's total revenue in the quarter was 36.46 billion US dollars, a year-on-year increase of 27%, the fastest growth rate in three years. Net income rose 117% year-over-year to $12.37 billion, and diluted earnings per share were $4.71, more than tripling from $2.2 in the year-ago quarter.
Among them, the advertising business is still Meta's core source of revenue, and this performance is gratifying. It increased 27% year-over-year to $35.64 billion, accounting for nearly 98% of total revenue. The daily active users of the family app group (FoA) increased by 7% year-on-year to 3.24 billion, and the number of ad impressions also increased by 20%.
This is mainly due to the application of artificial intelligence technology, which has significantly improved the accuracy of advertising targeting. According to Meta, more than half of their ad recommendations are currently AI-driven.
After a bottom-out 2022, Meta wants to try to regain market share in digital advertising. Zuckerberg then launched an initiative to restructure the advertising business, with a focus on the use of AI. Susan Li, chief financial officer, has said that the company has been investing in AI models that can accurately predict user-relevant ads, as well as tools that automate the ad creation process.
In terms of software, Meta recently presented the "GPT-4 level" open-source AI model king Llama 3, beating Gemini 1.5 and Claude 3 in multiple benchmarks, and increasing the potential training parameters to 400B. It is widely used in different platforms and scenarios, and vows to be free commercial bloodbath closed-source LLM companies and API providers. At the same time, Meta AI will be integrated into family applications such as Facebook, Instagram, WhatsApp and Ray-Ban smart glasses to provide users with more flexible and diverse assistant functions.
In terms of hardware, like every peer who doesn't want to be stuck in computing power, Meta has not only stepped up its stockpiling of NVIDIA chips, but also released the latest version of the Training and Inference Accelerator (MTIA). Using TSMC's 5nm process, it focuses on strengthening AI inference, and is specially designed for the ranking and recommendation system of its social software, and its performance is 3 times higher than that of the previous generation. They have also developed a large rackmount system that can accommodate up to 72 accelerators to support self-developed chips. Now all have been deployed in Meta's data centers, complementing commercial GPUs.
With the synergy of AI software and hardware, overseas retailers from China, such as Temu and Shein, have also added fuel to Meta's performance with huge investment in Facebook and Instagram advertising. And as the 2024 U.S. presidential election approaches, political advertising has surged. According to AdImpact's latest forecast, this year will be the most expensive election cycle in U.S. history, with ad spending expected to reach $10.2 billion.
At the same time, Meta has laid off nearly 10% of its workforce due to its annual efficiency adjustment plan, bringing the total number of employees to 69,329 as of March 31, 2024.
In stark contrast to streamlined operations, Xiaozha has a more drastic artificial intelligence layout. In the face of the intensifying AI war in Silicon Valley, Meta raised its capital expenditure in 2024 from an expected $30 billion to $37 billion to $35 billion to $40 billion to "accelerate infrastructure construction to support the company's AI roadmap" and continue to compete for top AI talent to join the company's technology research and development with high salaries.
In addition, he seems to have an "obsession" with the metaverse, saying that he will continue to stick to the long-term goal of investing in "building a virtual world full of avatars". It should be noted that although the revenue of the Reality Labs division, which is responsible for VR/AR/MR and metaverse development, increased year-on-year in the quarter, it still lost $3.8 billion, and the total loss has exceeded $45 billion since the end of 2020.
The uncertainty, coupled with expanding AI spending and a lower-than-expected second-quarter revenue outlook, has raised concerns about Meta's continued profitability in the future. Despite delivering a stellar result, Meta's stock price still fell.
And that doesn't seem to have shaken Zuckerberg's resolve to push AI. Just as the stock price is diving, the earnings call will be opened as scheduled.
He firmly told investors that he would spare no expense to build Meta into "the world's leading artificial intelligence company". He also revealed that Meta is actively exploring a variety of AI monetization strategies, including providing enterprise-level services, introducing advertising into AI interactions, and allowing people to pay for larger AI models and access to more computing resources. AI has also helped Meta increase app engagement, which can lead to more ads being seen and directly improve ads to bring more value.
However, Xiaozha also bluntly said, "Building leading AI will be a more difficult task than optimizing the application experience, and it may take several years." The implication is that while the AI path is absolutely full of long-term value, don't expect it to make a lot of money right away. Meta's stock price plummeted 18% after hours, and its market value shrank by nearly $200 billion.
This unexpected move reflects the prevailing attitude on AI on Wall Street: the market wants to see a balance between spending and growth rather than a one-wheel AI investment, and expects clearer monetization signals.
However, for Meta, it is determined to pay and wait for Meta to fully embrace AI technology and apply it to social networks, advertising, the metaverse, wearables and other fields, even if it is several years away from being converted into considerable profits. Zuckerberg blocked his future this time, and there was no turning back when he opened the bow.
Microsoft: Returning to the top 1 in the global market capitalization, the intelligent cloud has made great contributions to AI
Unlike Meta, which was hit hard by the Nasdaq market, Microsoft gained momentum after the release of its earnings report. It rose 5% after hours, surpassing Apple for the Nth time to become the world's most valuable company.
As the first frontrunner to bet on the commercialization of generative AI, Microsoft's performance is still strong, and all business indicators have exceeded expectations:
Total revenue was $61.86 billion, up 17% year-over-year, exceeding the previous official guidance of 14.5%. Net profit was US$21.94 billion, up 20% from US$18.3 billion in the same period last year. Adjusted earnings per share came in at $2.94, beating consensus estimates of $2.82.
Intelligent Cloud, which includes Azure public cloud, Windows server, speech recognition software Nuance and GitHub, continued to live up to expectations, driven by strong demand for AI, with revenue up 21% year-on-year to $26.7 billion, higher than the consensus of $26.25 billion. The growth rate was the highest in five fiscal quarters, and it also surpassed rivals Amazon AWS and Alphabet Google Cloud.
Among them, Azure and other cloud services surged by 31% year-on-year, with 7 percentage points coming from AI contributions.
CEO Nadella noted on the call, "Azure has become the center of AI projects, not only about AI models, but also about databases and other services. Many customers are using Microsoft's platforms and tools to build their own AI solutions:
More than 65% of Fortune 500 companies use Azure OpenAI services, and GitHub Copilot for developers already has 1.8 million paid subscribers. 30,000 customers customize their Copilot using the Copilot Studio low-code tool. ”
In addition to the intelligent cloud, the market is also very concerned about the sales performance of the Office suite, as this is Microsoft's first full quarter since the launch of the 365 Copilot generative AI assistant to commercial customers in November last year.
According to Nadella, Copilot has embedded OpenAI's latest technology into Microsoft's entire product line to provide customers with a variety of value-added services. According to the data, the revenue of the productivity and business process division increased by 12% year-on-year to $19.6 billion in the quarter, of which Office 365 revenue increased by 15%, and the number of paid subscribers has now reached 80.8 million, and it is expected to continue to achieve stable growth in the next fiscal quarter - which shows that Microsoft has a solid foundation and remarkable achievements in the commercialization of AI software.
In addition, thanks to the acquisition of Activision Blizzard in October last year, Microsoft's personal computing segment, which includes the gaming business, also achieved double-digit growth to $15.6 billion, and Xbox's performance increased by 62% year-on-year.
"Microsoft is leading a new era of AI transformation, delivering better business outcomes across roles and industries," Nadella confidently said. ”
Source: Reuters
Since the beginning of this year, Microsoft has been making big moves in the field of AI. On the eve of the earnings announcement, a market-exciting announcement was made: the signing of a five-year, $1.1 billion strategic contract based on the 2020 cooperation agreement with Coca-Cola Company. Help them achieve further digital transformation with Microsoft Azure cloud, Microsoft 365 Copilot tools, and leading generative AI technologies.
Last week, Microsoft's AI empire expanded into the Middle East for the first time: it invested $1.5 billion in Emirati AI company G42 to secure a minority stake and board seats. At the same time, G42 will run its AI applications and services on the Azure cloud computing platform.
In terms of large model layout, after throwing $13 billion at OpenAI, Microsoft has also decided to stop favoring ChatGPT and open up more possibilities. In February, it announced that it had reached an in-depth cooperation with Mistral AI, a French star AI startup, to invest 150,000 euros and provide computing infrastructure to assist in large model training and inference. Mistral has also become Microsoft's second commercial closed-source model provider in addition to OpenAI.
In March, after leading the latest round of funding for artificial intelligence unicorn Infection AI, Microsoft poached its two co-founders and most of its technical staff. Appointed former Inflection CEO Mustafa Suleyman as CEO of Microsoft AI, Microsoft's new artificial intelligence division, responsible for integrating consumer toC products, including Copilot, Bing and Edge, reporting directly to Nadella. Another co-creator, Karen Simonyan, joined as Chief Scientist. The operation not only obtained the authorization of Inflection technology, but also completed the "hollowing-out" level of talent acquisition, which once shocked the industry.
In terms of hardware, in addition to launching two new Surface as the next generation of AIPC, Microsoft is also developing a new network card similar to the NVIDIA ConnectX-7 to support the self-developed Maia 100. And plans to stock up on 1.8 million AI chips by the end of this year, tripling the number of GPUs. Significant progress has also been made in building a $100 billion data center with OpenAI and building a supercomputer called "Stargate".
Betting on a number of mainstream large-scale model development teams, striding into the data processing capabilities, coupled with the stronger technical advantages after the launch of GPT-5, Microsoft has a stable position.
Looking at the new round of financial performance of Meta, Alphabet and Microsoft, it is not difficult to see that generative AI has fully penetrated all aspects of the business pipeline and has become the core engine driving enterprise growth.
Microsoft's success is particularly typical, with a number of AI software and hardware forward-looking layouts firmly in the top spot, and various businesses have taken off at a high speed.
Although Meta's huge investment in AI has shocked investors, and it is still unknown whether it can achieve commercial profitability as soon as possible, AI-boosted advertising revenue has begun to show results. With the support of Llama's large model and computing power, Zuckerberg's determination and ambition to build a global AI leader should not be underestimated.
As for Big Brother Google, it has finally found its rhythm in the AI wars. Gemini, TPU and other weapons have been sharpened and are ready to accelerate the search for new growth points in the AI wave.
The three giants are surprisingly consistent in their judgment on the direction of artificial intelligence development, and they have all made a big bet with real money to invest in this future technological revolution. Standing on the cusp of the times, how high and far AI can finally take them to fly, the eyes of the global technology industry will be looking here.
(封面图来自Josh Edelson/AFP via Getty Images)