For the second consecutive quarter, Microsoft Corp. and Alphabet Inc., the parent company of Google, talked about investments in artificial intelligence (AI), but their Tuesday results signaled that any significant increases in revenue will be gradual.

The digital behemoths have introduced a wide range of products that they claim are jam-packed with generative AI, which builds brand-new text, image, and code from previously collected data. The phrase gained popularity after Microsoft-backed company OpenAI developed ChatGPT, a chatbot that composes responses in a human-like manner.

The start of the quarterly reporting season has seen a roughly two-fold increase in the use of the phrase “AI” in S&P 500 company conference calls compared to the prior quarter, according to a Reuters research.

On its first-quarter earnings call on Tuesday, Google used the phrase 52 times, up from 45 in the previous quarter. Without mentioning its partner OpenAI, Microsoft said it 36 times compared to 20 times.

Both businesses claimed that AI was already boosting sales, but neither specified when or if they would begin separating out the costs, revenues, and profits associated with the technology.

Sundar Pichai, the CEO of Alphabet, stated on Tuesday that there were “lots more to come” after mentioning some of the technologies the business debuted last month, including Bard, Google’s response to Bing, the ChatGPT-powered Microsoft search chatbot.

Google reported quarterly profit and revenue above projections and announced it would buy back $70 billion in stock. Google has also introduced a flurry of AI capabilities for its email, collaboration, and cloud software.

It said last week that it would join Google Brain and DeepMind’s AI research teams to develop “multimodal” AI, like OpenAI’s newest model GPT-4, which can produce new material in response to inputs other than text, such as images.

“I mean, things will move swiftly and the announcements are there. Thomas Martin, a senior portfolio manager at Globalt Investments, said, “But I think it’s going to take some time to see really substantive outcomes.

“As far as working it into actual numbers… think about how long it took for Google to break out YouTube just as an example,” he added, adding that anything meaningful was unlikely to show up on statements for more than a year.

But Microsoft’s chief of investor relations, Brett Iversen, cautioned that “it’s really early” and that AI was still only a small portion of the company’s overall revenue.

Big names
Over 10,000 businesses, including Coca-Cola and General Motors, have joined up since Microsoft made its new AI “Copilot” developer tool widely available three months ago, according to Nadella. Its product suite, which also includes Word documents, Excel spreadsheets, and Outlook emails, uses the tool.

Tuesday’s quarterly revenue and profit results for Microsoft exceeded expectations thanks to expansion in its cloud computing and Office productivity software sectors.

Bing has consistently lagged behind Google search, but Nadella claimed that since the inclusion of AI features, Bing downloads have increased and that it now has 100 million daily users.

According to Haruki Toyama, portfolio manager at Madison Investments, “Microsoft’s enterprise software may ultimately be affected much more than search.”

Toyama said that Google already employed AI to commercialize its search engines and that it was not as threatened by competing AI developments as was previously believed. Inc. and Meta Platforms Inc. have both hopped on the AI bandwagon and will disclose results the following week.

Meta, which has acknowledged that it is lagging behind in AI, has released an AI model that can identify specific items within a picture. The largest cloud provider in the world, AWS from Amazon, has provided a set of tools to assist other businesses in creating their own chatbots powered by AI.

On Tuesday after market, shares of Meta and Amazon increased 2.3% and 5.3%, respectively.


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