When it comes to AI, Big Tech has to spend money to make money (eventually…fingers crossed).
Companies like Microsoft, Google, and Meta have gotten that first part down, pouring tens of billions of dollars into new data centers and other AI infrastructure. Microsoft and Google saw those bets start to pay off nicely in the most recent quarter, with major growth in their respective cloud businesses. Meta also claimed its strong ad sales were fueled by AI efficiencies.
Investors cheered strong results from Meta and Microsoft this week with more than $500 billion in stock market gains, according to Reuters’ tally.
Unmet demand: Microsoft’s Azure cloud business pulled in $75 billion in the past year, notching 34% YoY growth. Along with strong overall earnings and revenue beats, the results fueled the tech giant’s ascendance as the second-ever $4 trillion company this week, behind Nvidia. This was the first time Microsoft broke out revenue for Azure specifically, beyond the “cloud services” bucket.
- Microsoft has said it would slow down capital expenditures in the next fiscal year, which started this month, but it still plans to spend $30 billion this quarter. CFO Amy Hood said the company is trying to keep up with a backlog of existing demand.
- Microsoft said its Copilot apps now have 100 million users every month.
A bigger bill: While Microsoft plans to slow spending, Google said last week that its AI infrastructure spending would be $85 billion for the year, $10 billion more than previously expected, because of strong cloud demand. Google also marked a banner quarter for its cloud arm with 32% YoY growth, as well as broader earnings and revenue beats.
Keep up with the innovative tech transforming business
Tech Brew keeps business leaders up-to-date on the latest innovations, automation advances, policy shifts, and more, so they can make informed decisions about tech.
Alphabet recently notched a win when OpenAI said it would add Google Cloud to its roster of suppliers for ChatGPT, as OpenAI continues to diversify beyond its partnership with Microsoft, according to CNBC.
A super bet: Then there’s Meta, where strong earnings and revenue beats ensured that Mark Zuckerberg was able to spend most of the call discussing his favorite topic: the company’s new quest for superintelligence. Meta has spent recent weeks setting its game board with nine-figure pay packages to top researchers and a new lab organized around former Scale AI CEO Alexandr Wang.
- All those massive pay packages for AI researchers will make employee compensation Meta’s second biggest cost driver for next year, beyond AI infrastructure.
- In a missive Zuckerberg shared ahead of earnings, the Meta CEO said “novel safety concerns” will mean the company has to be “careful about what we choose to open source.” Meta’s Llama model family has been among the leading options for open-weights models.
He clarified in the call that while “I don’t think that our thinking has particularly changed” on open-source, some models might be too big or unsafe to open-source in the future. “We’re getting models that are so big that they’re just not practical for a lot of other people to use. So it’s, we would kind of wrestle with whether it’s productive or helpful to share that or if that’s really just primarily helping competitors or something like that,” Zuckerberg said.