Google (Alphabet) and Microsoft are giants in the technology industry, and their performance is heavily influenced by advertising, cloud services, and investments in cutting-edge technology.
The third-quarter 2023 earnings have been announced, and the results for Google and Microsoft are in stark contrast.
This article will compare the financial results of both companies and delve into the underlying factors.
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■ Google’s Strong Advertising Revenue and Challenges in Cloud Business
Google’s parent company, Alphabet, reported its third-quarter (July to September) earnings, with a revenue increase of 11%, reaching $76.6 billion compared to the same period last year.
Advertising revenue is a significant driver for Google’s performance, accounting for $59.6 billion of the total revenue.
This advertising revenue is broken down into $44 billion from Google Search and $8 billion from YouTube.
Notably, Google Search recorded $44 billion, signifying a significant recovery from a decrease in advertising revenue last year, indicating that many companies are investing heavily in advertising once again.
However, Google’s cloud business faced challenges.
Cloud revenue reached $8.4 billion, with a profit of $266 million, both falling short of market expectations. Additionally, the growth rate of the cloud business slowed from a 28% increase in the previous quarter to 22.5%.
As a result, Alphabet’s stock price fell by over 5% in after-hours trading, indicating that investor expectations for the cloud business were dampened.
■ Microsoft’s Robust Cloud Business and Investments in AI
On the same day, Microsoft reported strong results.
In the third quarter of 2023, Microsoft’s revenue increased by 13% to $56.517 billion compared to the same period last year, with a final profit of $22.291 billion, marking a 27% increase.
This success can be attributed to Microsoft’s cloud business and investments in artificial intelligence (AI).
Microsoft’s cloud business had notably strong performance, with cloud service revenues like “Azure” increasing by 19% to about $24.3 billion.
Windows-related revenue also increased by 3% to around $13.7 billion.
Microsoft has been actively integrating AI into various services and promoting a strategy of leveraging AI technology.
They introduced new services with conversational AI on Windows and integrated conversational AI into applications like “Excel” to enhance user productivity.
Microsoft’s CEO, Satya Nadella, stated that they are accelerating the adoption of AI to enhance user productivity, emphasizing the company’s commitment to leveraging AI in their services.
■ The Rise of AI Technology and Its Impact on the Market
The ascent of AI technology is a critical factor for many technology companies, including Google and Microsoft.
Both companies are actively adopting AI technology to maintain and improve their competitiveness in the market.
AI technology is expected to continue growing in the future, with companies increasingly incorporating AI as part of their business strategies.
Google’s stock price has surged by over 50% this year, thanks to the AI boom.
Although there were concerns about the impact of AI technology, particularly regarding how ChatGPT might affect Google’s market share, the company reassured investors by exceeding profit expectations in the second quarter.
AI technology is contributing to increased advertising revenue and the development of new services. Its significance is on the rise.
Microsoft is also actively adopting AI technology, and its positive financial results reflect this.
AI technology supports the cloud business and contributes to enhancing user productivity in cloud services.
Microsoft is pushing forward with AI technology adoption to maintain its competitiveness and success in the market.
■ Market Trends and Their Impact on Stock Prices
Market trends are also influencing the stock prices of Google and Microsoft. The increase in long-term interest rates in the United States has affected the entire stock market.
Companies such as semiconductor giants and aviation industry leaders saw their stock prices drop due to the rising long-term interest rates.
Furthermore, the performance of Google’s parent company, Alphabet, in the third quarter of 2023, where cloud business results fell short of market expectations, also played a significant role in affecting the market.
Consequently, Alphabet’s stock price fell by over 5% in after-hours trading, dampening investor expectations for the cloud business.
The Nasdaq Composite Index, which includes many IT companies, was also impacted, with its stock price dropping due to market trends.
The market is highly sensitive to the performance of cloud businesses and the evolution of AI technology, both of which have substantial impacts on stock prices.
■ Conclusion
The financial results of Google and Microsoft are significantly influenced by advertising revenue and the performance of their cloud businesses, and the outcomes have been contrasting.
Google achieved a recovery in advertising revenue and successful utilization of AI technology, but it faces challenges in its cloud business. In contrast, Microsoft achieved strong results through its cloud business and investments in AI, enhancing its competitiveness in the market.
The growth of AI technology is crucial for both companies, and they are strategically leveraging AI to strengthen their positions in the market.
However, market trends and competition are affecting stock prices, making them critical factors for investors to monitor.
In the future, further advancements in AI technology are expected, and its successful utilization will likely be the key to success for technology companies.
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