Microsoft is Crushing Google and other competitors in the market of IT giants with its superior use of AI in the cloud infrastructure sector. Microsoft’s stock price went high on Wednesday as its earnings were better, and it gave strong predictions for the next quarter’s performance. But Google Cloud’s stock dumped more than 8.5% in early trading Wednesday, which caused people to quickly sell their shares. This decline was especially worse when compared to Microsoft’s cloud service, Azure (which did pretty well).
I would say, “We all were rooting for Google to take the lead, but Microsoft came out of the syllabus.”.
Here, let’s analyze the numbers.
Microsoft is Crushing Google with Numbers
Microsoft’s Azure cloud infrastructure service is behind the win, which reported a remarkable 29% revenue growth. The cloud services of Microsoft enjoyed a 19% revenue increase, reaching $24.3 billion, and saw its operating income leap by 31% to $11.8 billion. This translates to an operating margin of nearly 49%, a testament to the company’s effective execution business model. In comparison, Google Cloud’s growth slowed down and generated only 11% of the revenue of the total company.
Furthermore, Azure’s OpenAI has over 18,000 customers and more than 60 data center regions.
Now, Let’s discuss the whys:
Why Azure’s OpenAI Leads the Race?
Satya Nadella, Microsoft’s CEO, credits this success to its “extensive global infrastructure and leading AI capabilities”. Microsoft’s CFO Amy Hood also stated that “Higher than expected AI consumption contributed to revenue growth in Azure”.
Moreover, Azure’s amazing AI features also bring in people who have never used them. Microsoft has invested a lot of money into AI, including a huge amount in the company that created ChatGPT OpenAI.
Satya Nadella also stated that “Microsoft’s strategy of Lifting the same AI model across various products, from ChatGPT to Bing Chat and Copilot, has resulted in an increase of scale and a unique competitive edge”.
In contrast, Google’s revenue heavily relies on advertising, and its AI enhancements in cloud services have yet to make a notable impact.
Why Google’s Cloud Service is behind?
We all saw how Google’s CEO, Sundar Pichai, had been promoting the company’s various AI projects but didn’t share much specific details as Microsoft’s CEO Nadella did.
Google’s cloud service is currently ranked third after Amazon and Microsoft, and they are counting on AI for their business to grow faster. However, this approach didn’t satisfy investors this time around. Some experts even believe that focusing on Google’s cloud earnings is less important compared to its main source of income, which is advertising.
Future Plans of Both Companies
Microsoft’s CEO, Satya Nadella, predicted a competitive AI market after launching the AI-enhanced Bing, which wasn’t a challenge to Google’s search engine market. Still, he didn’t think that Microsoft would take the lead. The shocking part is that Microsoft has seen a 10% growth in its search and advertising revenues, which is on par with Google’s ad revenue growth.
Microsoft integrates AI across its products, including Azure, Github, and Office. It’s also planning to release its AI-powered Microsoft 365 copilot soon, which could boost its productivity software’s growth.
Even though Google’s cloud service is not much appreciated by investors right now, Google is trying to impress them with its in-progress AI-powered feature called the Search Generative Experience (SGE), which aims to give better answers to user questions.
Pichai also mentioned that they are also making sure the advertising on this new search feature will done right.
Microsoft is crushing Google and has risen to the top of the cloud market competition by utilizing AI well, especially in its Azure cloud services. Despite being the industry leader in search and advertising, Google faces competition in the cloud space. This battle has an influence that goes beyond business profits. The AI era is booming, and we can surely see how Microsoft played this game so well, and all the spending paid off. Let’s see how long will “Microsoft is crushing Google” goes on.
PS If you’re considering investing, both companies are strong, but Microsoft’s plans are clearer than Google’s, so DYOR.
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