Alphabet and Microsoft earnings show AI is still Wall Street gold

After Meta’s stock meltdown late Wednesday afternoon and Thursday, the tech sector is roaring back in after-hours trading on the strength of strong earnings reports from Alphabet, Microsoft, and Snap.

Snap shares were up more than 30% after its earnings release and Alphabet was up 13%. Microsoft shares, meanwhile, jumped 5.5%.

There were numerous reasons for the surges. Alphabet announced its first-ever dividend (of 20 cents per share) and a $70 billion stock buyback. And Snap gave guidance into future quarters, saying it expects daily active users to jump by 9 million in the second quarter to 431 million, a higher number than analysts were expecting.

But the backbone for the investor celebration? Artificial intelligence.

Microsoft reported growth of 31% in its Azure unit and said 7% of that total was from AI.

“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” said CEO Satya Nadella in the earnings release.

Google’s parent company, meanwhile, saw cloud revenue of $9.6 billion and declared the “Gemini era” was underway.

“There’s great momentum across the company,” said Sundar Pichai, Alphabet CEO, in a statement. “Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation.”

The post-market stock movements show that investor enthusiasm for AI isn’t slowing down, but how companies talk about the technology can make a big difference.

Meta, for instance, had a strong first quarter in terms of earnings and revenues, but Mark Zuckerberg’s focus on the conference call about all the ways the company was spending money appeared to spook investors, who sent shares of the company plunging. Meta shares lost 10.5% of their worth on Thursday—roughly a $100 billion loss in value.

The three companies that reported earnings on Thursday will certainly be spending heavily on continuing AI research in the months and years ahead as well, but they were a bit less fatalistic in their communication with investors.

Microsoft noted that “capital expenditures including assets acquired under finance leases were $14 billion to support demand in our cloud and AI offerings,” justifying the spend with a few well-placed words about demand.

That kept analysts happy. “Yes, investors should keep an eye on potential AI overspending,” Emarketer senior director of briefings Jeremy Goldman tells Fast Company in a statement. “But for now, Satya Nadella’s forward-looking strategy is building value by infusing productive intelligence across Microsoft’s entire portfolio – from the cloud to the desktop. With AI weaving its way into every offering, Microsoft may just cement its stay as the enterprise’s most indispensable partner.”

Snap, meanwhile, said, “We continue to invest in Generative AI models and automation for the creation of ML and AI Lenses, which contributed to the number of ML and AI Lenses viewed by Snapchatters increasing by more than 50% year-over-year.” Again, the emphasis was on the results of the spending.

Alphabet largely dodged the issue of AI spending, saying, “certain costs are not allocated to our segments because they represent Alphabet-level activities. These costs primarily include AI-focused shared R&D activities, including development costs of our general AI models.”

But Alphabet also announced the dividend, so investors were going to go crazy about that no matter what.

AI has been catnip to Wall Street for over a year now. And despite Meta’s blunt honesty in its earnings report, shares of that company are still more than twice the price of where they were a year ago.

The next piece of the AI puzzle won’t come for another month or so, when Nvidia reports earnings on Wednesday, May 22. 

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