(Mountain View) After years of Google dominating cutting-edge technologies, rival Microsoft, already ahead in the cloud, is overshadowing it by establishing itself as a leader in generative artificial intelligence.
The two American technology giants published better than expected revenues and profits on Tuesday given the current economic crisis.
Alphabet, Google’s parent company, posted nearly $70 billion in revenue in the first quarter, including $15 billion in net profit.
But despite these two results exceeding market expectations, “investors have little reason to be optimistic”, reacted Max Willens, analyst at Insider Intelligence.
The company’s advertising activity “is under threat”, he underlines.
“YouTube’s revenue fell again, and the fact that revenue from the search engine and other segments grew only 2% shows that Google’s core business has not faced such strong headwinds. since a long time “.
The world’s number one digital advertising company is facing inflation and rising interest rates, which means advertiser spending cuts.
Its YouTube platform is also facing competition from the ultra-popular TikTok.
The streaming service, like Instagram (Meta) and Snapchat, has copied the format of short and entertaining videos, but it is still unable to generate substantial revenue from its “Shorts”.
“ The initial feedback we have on the financial compensation […] for the creators of Shorts has been disappointing ”, underlined Evelyn Mitchell, of Insider Intelligence.
Google, which laid off around 12,000 people in January (6% of its workforce), and scaled back its real estate plans, must at the same time defend its status in artificial intelligence (AI).
Microsoft has clearly taken the lead in generative AI (capable of creating content on demand in everyday language) since the November launch of the ChatGPT interface, designed by the Californian startup OpenAI, in which it has invested heavily.
The Redmond firm (Washington State, northwest) has integrated ChatGPT into its Bing search engine, which has relaunched this portal, which until now has been unable to face competition from Google.
Since then, the two companies have been competing with each other with announcements, as they add generative AI features to their software, from the venerable word processor Word to the Gmail mailbox.
“Most organizations are thinking about how to use AI to transform themselves,” Sundar Pichai said on a conference call with analysts on Tuesday.
Alphabet brought together teams from Brain and DeepMind last week to accelerate research in AI.
“ We thus have the opportunity to build AI, and in the longer term general AI at the service of humanity ”, tweeted Demis Hassabis, the head of the new unit, Google DeepMind.
It refers to the idea popularized by OpenAI of creating AI systems that perform better than humans at many cognitive tasks.
In this quest for the new Holy Grail of technology, Microsoft has another advantage: the cloud, a sector where it is number two in the world, behind Amazon.
Google Cloud posted operating profit of $191 million in the first quarter. This is the first time the business has made a profit.
“This shows that the management is really working towards the profitability of this activity. But in practice, Google Cloud remains far behind its two main competitors, and its growth is slowing down”, commented Max Willens.
At Microsoft, revenue from the cloud — which relies on outsourced servers, but also a lot on artificial intelligence — jumped 22% year-on-year to $28.5 billion. They now represent more than half of the company’s turnover.
In all, from January to March, the company recorded revenue of $52.8 billion (7% YoY) and net income of $18.3 billion (9.4%).
Its stock rose about 9% in electronic trading after the close of trading.
Alphabet’s was up 1%, after rising a little more following the announcement of a $70 billion share buyback plan.
And the current quarter is not looking any easier for the Silicon Valley giant.
The US central bank plans to continue raising rates to fight inflation, despite the risk of recession.
And the American and European authorities are showing themselves to be more and more determined to regulate the major platforms, from competition law to the excesses of social networks.