All eyes are on Microsoft and Alphabet as the two tech heavyweights report quarterly results at the height of the artificial intelligence boom. The two tech giants have been at the forefront of adopting and integrating the revolutionary technology as they seek to strengthen their competitive edge and unlock new growth opportunities. Consequently, Wall Street will want to see the impact the technology has had on the two companies and the opportunities it is likely to generate.
Microsoft-Alphabet AI Rallies
Microsoft has been one of the biggest beneficiaries of the AI boom, rallying by more than 40% year to date. The rally has come on the software giant investing about $10 billion in OpenAI as it sought to gain access to its AI-powered chatbot. It has already integrated the chatbot into its search engine tool Bing. Now investors will want to know whether the integration helped strengthen the software giant edge on search, therefore, bringing in more riches. A better-than-expected earnings report could be the catalyst to propel the software giant into a $3 trillion company joining Apple in the exclusive club.
On the other hand, Alphabet, through its tech unit Google has been active on the artificial intelligence front as it seeks to safeguard its lucrative search business. It has already unveiled the AI-powered chatbot Bard as it looks to counter the threat posed by ChatGPT on the search front. The stock is also up by about 38%, falling short of the 42% gain by the tech-heavy Nasdaq index.
Alphabet would be in the spotlight to see whether artificial intelligence has the potential to strengthen the company’s multi-billion search advertising business. The market will also want to see whether Bard is helping people make decisions on where to go for vacation, among other common tasks that the technology has been known for.
After the earnings report, the focus will be on whether artificial intelligence is the technology that will help drive growth in the two tech giants. The earnings reports will also shed lighter on whether the two companies deserve the hefty valuations they have received in recent months. For instance, Microsoft is trading at 31 times its estimated earnings, a significant premium over the Nasdaq 100 index average.
Key Business Units
Nevertheless, it does not mean that Microsoft’s future solely depends on artificial intelligence innovations. Microsoft is still a market leader in software products, a business in which it generates a food chunk of its revenues. It is a key player in cloud computing and gaming business units that will also be under the spotlight when the earnings call hits the wire.
Similarly, the focus will also be on Alphabet’s digital advertising business storm, which generates the biggest revenue share owing to its search monopoly. The company is also big on cloud computing.
Meta is another company whose earnings will also be in the spotlight once the market closes. The social networking giant has been on an impressive run rallying by more than 100% year to date. The rally has come at the back of an aggressive restructuring drive that has seen the company lay off staff and focus on high-growth areas. It has also benefited from an uptick in advertising spending on its social networking apps.
