Microsoft profits surge on AI as Snap up 27% and Meta stock takes hit

Microsoft profits surge on AI as Snap up 27% and Meta stock takes hit

Thursday’s quarterly financial announcements from big tech firms were a mixed bag, with Microsoft reporting surging revenues that beat analyst estimates on the back of strong investment in artificial intelligence capabilities, while Meta’s stock has taken a hit after it announced costly AI investments of its own earlier this week.

Microsoft has emerged as a leader in the AI space after partnering with ChatGPT maker OpenAI, embedding the game-changing AI in its signature office offerings as Copilot, an AI assistant able to transcribe meetings, send emails, and make spreadsheets.

The Washington-based tech firm reported revenues were up 17 per cent year-over-year to $61.9bn this quarter, with net income up 20 per cent and AI helping drive a 31 per cent increase in demand this quarter for its Azure cloud services.

“They have been a leader in AI,” Gil Luria, a software analyst at DA Davidson, told The Wall Street Journal. “They’re really the only ones that can put their finger on actual AI revenue.”

Other tech firms saw similarly encouraging reports.

Shares of Snap, the company behind Snapchat, soared as much as 27 per cent on Thursday in extended trading, after the firm announced a 21 per cent year-over-year increase in revenue, beating market expectations.

The company, which contended with a major change on Apple devices in 2021 limiting its ability to target ads, has seen revenue growth the past three quarters.

Things were similarly upbeat at Google parent company Alphabet, which reported revenues this quarter were up 15 per cent to $80.5bn compared to this period last year. The company has also announced its first quarterly cash dividend and a $70bn share buyback.

“Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” CEO Sundar Pichai said in a release alongside the earnings announcement.

At Facebook and Instagram parent company Meta, meanwhile, things were more complicated.

The company announced its first quarter earnings on Wednesday, disclosing that first quarter profit had more than doubled year-on-year, and revenue was up 27 per cent.

However, plans to increase investment in AI as much as $5bn appear to have spooked the market, with Meta’s share price declining throughout Wednesday and Thursday, sparking a larger sell-off in tech stocks.