Microsoft, Alphabet CEOs wax poetic on AI but big boost to sales will take time

SAN FRANCISCO – Microsoft and Google-parent Alphabet talked up investments in artificial intelligence (AI) for the second quarter in a row but their results on Tuesday suggested that any substantial additions to sales will be slow.

The tech behemoths have launched products that they promise are packed with generative AI, which creates content – text, image, code – from past data. The term became a buzzword after Microsoft-backed firm OpenAI released ChatGPT, a chatbot that writes human-like responses.

“The world’s most advanced AI models are coming together with the world’s most universal user interface – natural language – to create a new era of computing,” Mr Satya Nadella, Microsoft’s chief executive officer, said on Tuesday.

With quarterly reporting season just under way, the term “AI” has been used nearly twice as frequently in the conference calls of S&P 500 companies as it was in the previous quarter, a Reuters analysis showed.

Google used the term 52 times on its first-quarter call on Tuesday, up from 45 in the fourth quarter. Microsoft said it 36 times, versus 20 – not including references to its partner OpenAI.

Both companies said AI is already juicing sales but neither said when or if they will start breaking out any sales, costs or profits from the technology.

“Lots more to come,” Alphabet boss Sundar Pichai said on Tuesday, after he mentioned some of the products the company launched last month, including Bard, Google’s answer to ChatGPT-powered Microsoft search chatbot Bing.

Google, which has also unveiled AI tools for its e-mail, collaboration and cloud software, reported quarterly profit and revenue above estimates and said it would buy back US$70 billion (S$94 billion) in stock.

It said last week it would combine its AI research units Google Brain and DeepMind and work on “multimodal” AI, like OpenAI’s latest model GPT-4, which can respond not only to text prompts but to image inputs as well to generate new content.

“I mean the announcements are there and things will move quickly. But I think it’s going to take some time to see real meaty results,” said Mr Thomas Martin, a senior portfolio manager at Globalt Investments.

“As far as working it into actual numbers… think about how long it took for Google to break out YouTube just as an example,” he added, noting that anything significant is unlikely to show up on statements for more than a year.

Mr Brett Iversen, Microsoft’s head of investor relations, told Reuters that “it’s really early” and AI is still a relatively small part of the company’s total business.

Big players

Mr Nadella said in the three months since Microsoft made a new AI “co-pilot” developer tool broadly available, over 10,000 organisations had signed up, including Coca-Cola and General Motors. The tool is for its product suite that includes Word documents, Excel spreadsheets and Outlook e-mails.

Microsoft beat estimates for quarterly revenue and profit on Tuesday, driven by growth in its cloud computing and Office productivity software businesses.

Bing has lagged Google search for decades but Mr Nadella said Bing downloads jumped since the addition of AI features and now has 100 million daily users.

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