How the AI arms race played out in tech giant earnings calls

Generative AI was the indisputable star of the show as tech giants announced their quarterly earnings this week.

Results from Microsoft, Alphabet, and Meta beat analyst expectations across the board, painting a rosy picture for the first quarter after months of layoffs and slashed spending. The debriefs were also the first since the arms race over a new wave of AI breakthroughs ramped up in earnest following the release of OpenAI’s ChatGPT.

Microsoft’s big AI moment

For Microsoft, which has poured billions of dollars into a long-term partnership with OpenAI, the technology has been a coup, spurring consumer excitement over its also-ran search engine for the first time in years, revamping its enterprise tools, and opening a host of new B2B opportunities.

The company put some numbers behind the buzz around its new GPT-4-powered iteration of Bing, which launched two months ago. Despite its occasional penchant for bizarre behavior, the search engine now has more than 100 million daily active users, and daily installs of the Bing app have quadrupled since the launch, according to the company.

“We look forward to continuing this journey in what is a generational shift in the largest software category—search,” Microsoft CEO Satya Nadella said on the call.

Nadella also touted the growth of its Azure OpenAI Service, which now offers enterprise access to ChatGPT and GPT-4. Nadella said the division is up 10x since last quarter, specifically shouting out Coursera, Grammarly, Mercedes-Benz, and Shell.

“Azure took share, as customers continue to choose our ubiquitous computing fabric—from cloud to edge, especially as every application becomes AI-powered,” Nadella said.

Google defends its standing

While Microsoft is often portrayed as having gotten the jump on Google in the AI race, CEO Sundar Pichai defended the search giant’s position in a call detailing results from Alphabet, Google’s parent company.

Despite some hiccups in the rollout of Bard, its ChatGPT competitor, Pichai pointed to the experience Google has in integrating large language models (LLMs) into its search in a more behind-the-scenes role.

“Obviously, in search, we’ve been using AI for a while. It’s what has really helped lead search and search quality for the past few years using LLMs,” Pichai said.

But those assurances aside, Google seems to be feeling pressure from increased competition in the search space. Its search revenue in the first quarter grew just 1.87% year on year, compared to around 24% YoY growth in the first quarter of last year and 30% the year before that.

One of Google’s biggest bright spots came from its cloud business, which turned a profit for the first time since the company began breaking out revenue for the division three years ago and now accounts for more than 10% of the company’s overall revenue.

Meta plays catch-up

Meta’s earnings call on Wednesday—its rosiest in nearly a year—came on the heels of a Reuters investigation published earlier in the day that detailed its struggles over the past several months to build out the hardware and software needed to keep pace with its tech rivals in AI development.

Meta CEO Mark Zuckerberg claimed the company’s AI-related efforts have paid off in terms of improving user experience. “Our AI work is driving good results across our apps and business,” Zuckerberg said in a statement accompanying the earnings.

Meta’s answer to Microsoft’s OpenAI products and Google’s Bard is a smaller LLM called LLaMa, which was made available to researchers last month before leaking online via 4Chan, as The Verge reported. Unlike its counterparts, Meta does not yet have a consumer-facing chatbot interface, although Zuckerberg said the company is exploring AI agents for the company’s messaging products.

Zuckerberg also said the company is not giving up on the source of its relatively new name, the metaverse. Meta racked up a nearly $4 billion loss in its metaverse-focused Reality Labs division last quarter, but Zuckerberg said the company’s goals in the space are also related to its AI investment.

“A narrative has developed that we’re still moving away from focusing on the metaverse vision. So I just want to say up front that that’s not accurate,” Zuckerberg said on the call. “We’ve been focusing on both AI and the metaverse for years now, and we will continue to focus on both."