Stock Climbs As Company Rides AI Wave To Profit, Sales Beats

Topline

Microsoft beat Street’s expectations in its earnings report released Tuesday afternoon, showcasing the early impact of its high-profile commitment to artificial intelligence in its first quarter since bolstering its investment in the firm behind the viral chatbot ChatGPT.

Microsoft CEO Satya Nadella in February at Microsoft’s Washington headquarters.

The Washington Post via Getty Images

Key Facts

Microsoft’s $52.9 billion in sales and $2.45 earnings per share surpassed analyst estimates of $51 billion and $2.24 per share for the first three months of 2023, according to FactSet, representing modest increases from the prior quarter.

Microsoft’s cloud computing business remains its most prolific unit, generating $22.1 billion in revenue, topping estimates of $21.9 billion.

Shares of the Redmond, Washington-based firm surged 5% in after-hours trading.

Tangent

Google parent Alphabet also reported earnings after the bell Tuesday, beating on the top and bottom lines as sales and profit came in at $69.8 billion and $15.1 billion. Google posted $40.4 billion in advertising revenue last quarter, declining roughly 5% from its $42.6 billion in sales in the segment the three months prior.

Key Background

ChatGPT launched with a bang in late November, landing its OpenAI parent a reported $10 billion investment from Microsoft in January. Bard, Google’s answer to ChatGPT, has failed to impress investors to the same degree, with Goldman Sachs and JPMorgan analysts each declaring Microsoft has a clear “lead” in the generative artificial intelligence space. Shares of Microsoft are up 15% since ChatGPT’s debut, compared to a 9% gain for Alphabet.

Surprising Fact

Traffic for Bing spiked 16% in the six weeks after Microsoft announced it would incorporate ChatGPT into search, according to Sensor Tower data cited by Bank of America.

Big Number

$2.05 trillion. That was Microsoft’s market capitalization at market close Tuesday, making it the third-most valuable company in the world. Microsoft’s market value is roughly $700 billion more than Alphabet, a gap that was as slim as $300 billion in late 2021.