Microsoft profit up 20% amid AI push, Google parent pays first dividend

Google parent Alphabet and Microsoft both saw their shares jump in extended trading - a contrast to Meta's tumble after it said the cost of AI investments would weigh on near-term results.

Microsoft says its profit rose 20 per cent for the January-March quarter as it tries to position itself as a leader in applying artificial intelligence technology to make workplaces more productive.

The company on Thursday (Friday NZ) reported quarterly net income of US$21.93 billion (NZ$36.85b), or US$2.94 per share, beating Wall Street expectations for earnings of US$2.82 a share.

The Redmond, Washington-based software maker posted revenue of US$61.86b in the period, its third fiscal quarter, up 17 per cent from the same period a year ago - ahead of the analyst consensus of US$60.86b.

Microsoft doesn’t spell out how much money it makes from AI products, including its flagship Copilot chatbot that can compose documents or generate images. But it has infused the technology into its main lines of business, such as cloud computing contracts and subscriptions for its email and other online services.

Quarterly revenue from Microsoft’s cloud computing business segment grew to US$26.7b up 21 per cent from last year’s January-March quarter. Revenue from the company’s productivity services – such as its Office line of products – rose 12 per cent to US$19.6b.

Businesses pay Microsoft US$30 per employee each month to add Copilot to a workplace subscription for its package of services that includes email and spreadsheets.

Gartner analyst Jason Wong said many of Microsoft’s customers had shown a strong interest in giving generative AI a try but don’t all have a solid plan for a practical use that justifies the cost.

“It’s still very early,” Wong said.

Microsoft’s personal computing business, centred on Windows, made $15.6b for the quarter, up 17 per cent from last year.

Microsoft stock rose about 5 per cent in after-hours trading Thursday.

Google parent reports another quarter of robust growth, rolls out first-ever quarterly dividend

Google’s corporate parent Alphabet Inc on Thursday (Friday NZ) released a quarterly report showing it is still reaping double-digit revenue gains from its digital advertising empire while sowing potentially lucrative new ground in artificial intelligence.

The results for the first three months of the year provided the latest evidence that Google has regained its momentum after an unprecedented downturn in 2022 coming out of the pandemic.

Alphabet punctuated its renewed vigour by also disclosing plans to begin paying shareholders a quarterly dividend for the first time since Google went public 20 years ago. It’s something that two older technology powerhouses, Microsoft and Apple, have been doing for years. Alphabet’s quarterly dividend of 20 cents per share will be paid June 17.

Investing.com analyst Thomas Monteiro praised the decision to pay a dividend as “a breath of fresh air for the tech market” that should also make investors more likely to support the increased amounts that Google will likely need to spend on developing AI products that could take years to pay off.

In the January-March period, Alphabet’s revenue rose 15 per cent from the same time last year to US$80.54b, which surpassed the projections of analysts surveyed by FactSet Research. It marked the fourth consecutive quarter of accelerating year-over-year revenue growth for the Mountain View, California, company.

Alphabet earned US$23.66b, or US$1.89 per share, a 57 per cent increase from last year’s comparable quarter. The earnings per share also eclipsed the analyst estimates that steer investors.

“It was a great quarter and there’s more to come,” Alphabet CEO Sundar Pichai told analysts during a conference call.

The company’s stock price soared by more than 13 per cent in Thursday’s extended trading after the news came out.

Stark contrast

That reaction was a stark contrast to how investors responded to a report covering the same quarter from Facebook’s parent. Meta Platforms also reported a surge in ad revenue but provided a disappointing outlook for the April-June period, while also warning its profits would be squeezed by increased spending on AI technology.