Microsoft is demonstrating how to excel at the artificial intelligence game while investors are punishing other hyperscalers, especially Alphabet's Google, as fears grow that their huge AI bets won't pay off. The contrasting performances could upend the tech-stock rally, analysts warn.
Microsoft booked $18.6 billion in free cash flow last quarter, easily surpassing analysts' estimates despite spending $45.2 billion on capital expenditures including data centers. In contrast, Google's core search business saw its smallest revenue increase in five quarters at 12 percent to $63.3 billion, while its AI infrastructure buildout pushed free cash flow to a $9.1 billion loss.
Google's Gemini chatbot recently reached over 1 billion monthly active users, and its cloud business is growing fast with AI chip sales. However, AI search offerings are generating fewer advertising dollars, and the massive infrastructure spending spooked investors. After Meta's and Alphabet's numbers revived AI-spending anxiety, Microsoft's performance provides a counterweight.
Source: New York Times Business · Summarized by HeadlinesBriefing