AI offerings contributed 7 percentage points to the Azure cloud-computing platform's 31% revenue surge between January and March, as stated by finance chief Amy Hood of Microsoft.
Hood noted that near-term AI demand slightly outpaced the company's capacity, hindering growth in the quarter and underscoring the necessity for investment to expand its infrastructure.
Google witnessed a 28% rise in cloud revenue, driven by robust expansion in Google Workspace, where Alphabet provides an array of AI functionalities powered by its extensive language model Gemini.
These outcomes contrasted sharply with Meta's
(META.O) cautionary note on increased spending and lower-than-anticipated growth, leading to a 10% decline in its stock value on Thursday.
"This quarter highlighted sustained high demand for generative AI among Microsoft customers, affirming our belief that Microsoft holds a leading position in this GenAI landscape," remarked D.A. Davidson analyst Gil Luria.
"Meta suggests that the outcomes of heightened investment may be years away, while Microsoft and Google are delivering them in the present."
Furthermore, these results spurred a 3.4% increase in Amazon.com's
(AMZN.O) stock, which is set to report earnings on Tuesday.
"The three major cloud companies we've heard from so far have all emphasized a similar message regarding AI capital expenditure - this is a race, the AI potential is immense, and spending will continue to be aggressive and ahead of market expectations," observed Bernstein analyst Michael Chiang.
Microsoft's capital expenditures rose by $300 million from the previous quarter to $11.5 billion, while Alphabet's capital expenditures reached $12 billion, marking a 91% increase from the previous year.
At least 28 analysts raised their price targets for Alphabet, pushing the median estimate to $190, compared to its last closing price of $156. Similarly, Microsoft saw price target increases from at least 25 analysts, with the median estimate for the stock now standing at $475.
Microsoft boasts a 12-month forward price-to-earnings ratio of 30.40, exceeding Alphabet's ratio of 21.63.
Some analysts argue that the higher premium valuation is warranted.
"Google Cloud exhibited improvement, although not matching Azure's growth. Azure's focus on enterprises and its unique capabilities played a role, and we (along with the market) eagerly await Amazon Web Services' results," stated Bernstein analysts.
