Google and Microsoft are still riding the AI wave

Microsoft and Google are proving there’s money to be made in generative AI—at least when there are cloud services to sell along with it.

While investors may be growing impatient with Mark Zuckerberg’s far-sighted AI dreams, things looked rosier for other competitors in the Big Tech AI race in the last quarter. Google and Microsoft both posted better-than-expected results, aided by strong growth in demand for their respective cloud computing businesses.

Both companies continue to spend an increasing amount on data center infrastructure and chips to support AI, and Google helped soothe investors by announcing its first-ever cash dividend. Microsoft, meanwhile, seems to be proving it can earn returns on this spending both in the cloud and on its Copilot software.

Copilot’s seat: Microsoft said its Azure cloud services grew 31% in its fiscal third quarter, fueled in part by companies building AI tools on top of it.

“Azure has become a port of call for pretty much anybody who is doing any AI project,” CEO Satya Nadella said during an earnings call. “And so that’s sort of been a significant help for us in terms of acquiring even new customers.”

Beyond the cloud, Nadella said Microsoft’s Copilot AI tool, now integrated in the company’s productivity software suite, is gaining traction since it was made widely available to all businesses and consumers earlier this year. He claimed that “nearly 60% of the Fortune 500 [companies] now use Copilot.” Nadella also touted growth in Microsoft’s Github Copilot code generation service.

Googling answers: Alphabet’s results were also buttressed by ongoing demand for its comparatively smaller cloud business. Revenue from its cloud services grew around 28% to $9.6 billion in Q1.

CEO Sundar Pichai also claimed that Google has already “served billions of queries with our generative AI features.” But when analysts probed for details about the metrics beyond that figure, Pichai said the company is still collecting data.

“We are still continuing our testing…but I am optimistic that it clearly improves the user experience,” Pichai said.

Pichai also didn’t reveal any details about how much headway Google’s own AI subscriptions have made toward widespread adoption. Google introduced a premium plan for access to its new Gemini family of models in February, but the rollout was marred by controversy around the accuracy of its image generation.