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AI giants' earnings: Triumph or trouble for Microsoft, AMD, Google?

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Google sign (file photo) Copyright Virginia Mayo/AP2010
Copyright Virginia Mayo/AP2010
By Piero Cingari
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The quarterly financial reports from artificial intelligence heavyweights Microsoft, AMD and Google, released yesterday, delivered a mix of unexpected positive outcomes and disappointments.

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The latest earnings reports from the tech giants on Tuesday have triggered some re-evaluations among investors, raising questions about the sustainability of the anticipated exponential growth rates.

Microsoft beats forecasts

Microsoft's financial results for the quarter ending December 2023 were stronger than expected. The tech titan reported revenues of $62 billion (€57.18 billion), an 18% increase year-over-year, marginally topping the consensus estimate of $61.12 billion (€56.39 billion).

Net income soared to $21.9 billion (€20.20 billion), marking a 33% growth compared to the previous year. Earnings per share reached $2.93, outperforming Wall Street's prediction of $2.77.

Breaking down the revenue streams, the Productivity and Business Processes unit brought in $19.2 billion (€17.71 billion), up 13% year-over-year. The Intelligent Cloud segment, including Azure, saw a 20% rise with $25.9 billion (€23.90 billion). More Personal Computing contributed $16.9 billion (€15.60 billion).

"We’ve moved from talking about AI to applying AI at scale... we’re winning new customers and helping drive new benefits and productivity gains across every sector," Microsoft CEO, Satya Nadella, said.

Future projections place Microsoft's revenue for the upcoming fiscal quarter between $60 billion (€55.40 billion) and $61 billion (€56.29 billion), broadly in line with investor estimates. Despite these strong results, Microsoft's stock dipped about 1%, following a recent milestone where it surpassed Apple as the world's most valuable company with an over $3 trillion market cap.

AMD disappoints predictions

AMD's results, however, painted a less rosy picture. The fourth quarter of 2023 saw revenues reach $6.17 billion (€5.69 billion), a 10.2% year-over-year increase but barely over the anticipated $6.13 billion (€5.66 billion) by analysts.

The Santa Clara-based company reported a quarterly profit of $667 million (€615.30 million), with earnings per share at $0.77, aligning with or slightly below expectations.

“Demand for our high-performance data centre product portfolio continues to accelerate, positioning us well to deliver strong annual growth in what is an incredibly exciting time as AI re-shapes virtually every part of the computing market,” AMD Chair and CEO, Dr. Lisa Su, said.

AMD's data-centre business grew by 38% in terms of sales, hitting $2.3 billion (€2.12 billion) thanks to the booming AI demand, yet projections of sequential declines in various business segments including its client, embedded, and gaming businesses led to a 6% drop in stock prices post-earnings.

Google's record quarter overshadowed by weak ad revenues

Alphabet Inc.'s Google posted a record-breaking quarter, yet failed to enthuse investors. The fourth quarter of 2023 saw a revenue surge to $86.31 billion (€79.62 billion), a 13% increase from the previous year and above the forecast of $85.28 billion (€78.68 billion).

Net income reached $20.7 billion (€19.09 billion), a significant 51% jump from the previous year. Earnings per share were at $1.64, surpassing the expected $1.59.

Despite strong overall performance, Microsoft's results were tempered by underwhelming advertising revenue. Total advertising sales reached $65.5 billion (€60.43 billion) in the fourth quarter, an 11% increase from the previous year, yet fell short of the expected $66.1 billion (€60.97 billion).

Sundar Pichai, CEO of Google, reflected optimism, saying: "We are pleased with the ongoing strength in Search and the growing contribution from YouTube and Cloud... As we enter the Gemini era, the best is yet to come."

Alphabet, Google's parent company, also announced plans to significantly increase spending on data centres to bolster its AI capabilities. This move underscores the escalating costs and competition in the AI sector, particularly against rivals like Microsoft.

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