MicrosoftAlphabet-C handed in their assignments at the same time, and Alphabet-C made a stunning comeback and earned a big profit.

One of the most interesting and watched earnings days of the quarter has come. The strong duel between Alphabet-C and Microsoft in AI business continues, and this time, the quarterly results of the two giants were even released on the same day. In the past quarter, the "battle" between Alphabet-C and Microsoft can be said to be very anxious. Alphabet-C IO, Microsoft Build and other annual conferences have appeared one after another, and the two companies are overwhelmed with AI model updates and product releases. But what everyone is curious about is whether AI has really brought them users and benefits, and which of the two companies has performed better? Let's find out the answer in their latest quarterly results. ## * * Not afraid of Microsoft challenges, Alphabet-C advertising and cloud business are both soaring * * After Microsoft's massive march into AI, the market is sweating for the previous AI overlord Alphabet-C. After all, the onslaught Microsoft now launched on search, productivity tools, and cloud businesses all point to the Alphabet-C. In the first quarter of this year, Alphabet-C's key indicators such as operating profit and earnings per share also failed to meet the standards, and there was a significant decline. But this time, **Alphabet-C completely withstood the pressure, not only the indicators far exceeded market expectations, the advertising business seems to be completely out of the decline back to a stable growth range, the strong growth of the cloud business is also a bright spot. * Alphabet-C achieved revenue of $74.604 billion in the second quarter, up 7% year-on-year, far exceeding market expectations of 4.4 per cent growth and $72.77 billion in revenue. Although the growth rate has not returned to double digits, it is far better than the 3% year-on-year growth in the previous quarter. In terms of earnings indicators, diluted earnings per share in the second quarter was $1.44, up 19 per cent from a year earlier, higher than the market's 9.1 per cent growth forecast, while this indicator fell 4.9 per cent in the previous quarter, while operating profit was $21.838 billion, up nearly 12.3 per cent from a year earlier, well above market expectations of 2.6 per cent, compared with a 13.3 per cent year-on-year decline in the previous quarter.! This quarter Alphabet-C earnings reversal, picture from Robinhood From the sub-business point of view, Alphabet-C this quarter also swept away the haze of the previous quarter, a big win. Among them, the revenue of Alphabet-C services including advertising, search, maps, YouTube, hardware, Android, Alphabet-C and Google Play was 66.285 billion US dollars, up about 5.5 percent year on year. * * Among them, the performance of the advertising sector was particularly bright, not only stopping the continuous decline for two quarters, but also the growth of search business and YouTube exceeded expectations. * * Overall advertising revenue in the second quarter was $58.143 billion billion, up 3.3 percent year-over-year, exceeding market expectations of 2.1 percent. Revenue from Alphabet-C search and other related businesses was $42.628 billion, up about 4.8 percent year-over-year, accelerating from the 1.9 percent growth in the previous quarter. After disappointing the market for several quarters, YouTube grew 4.4 percent in the quarter, well above analysts' expectations of low growth of 1 percent to generate $7.665 billion. In addition to advertising, the cloud business of the second growth curve, which is of particular concern, continued its high growth momentum and did not suffer the fierce impact from AWS and Microsoft cloud as expected by the market. Alphabet-C cloud revenue in the second quarter was $8.031 billion, up about 28% year-on-year, the same as the first quarter growth rate, higher than the market's expectation of 24.8 percent, and there was no significant slowdown in growth. **It is worth noting that after Alphabet-C Cloud made its first profit in history in the last quarter, the cloud business continued to be profitable this quarter, with a profit of $0.395 billion, double the $0.191 billion in the previous quarter, while the loss in the same period last year was as high as $0.59 billion. **Alphabet-C's bright earnings performance for the quarter was also directly reflected in the share price. After today's U.S. stock market, Alphabet-C shares rose more than 7%.! Although the key performance indicators are encouraging, Alphabet-C did not talk too much about AI and its impact on the business this time. At the earnings conference, there were two main issues related to AI. * * First, Alphabet-C announced a high-level personnel change. Alphabet-C Chief Financial Officer Ruth Porat will serve as Chief Investment Officer (CIO). She will hold two jobs before Alphabet-C to find a new CFO candidate. As CIO, she will be responsible for Alphabet-C global investment in innovative departments including AI and self-driving. **Second, Alphabet-C said it will continue to increase investment in data centers and servers this year, releasing a strong signal for AI services. Investment in AI has not significantly increased Alphabet-C business expenditures. Alphabet-C's capital expenditure for the quarter was $6.89 billion, well below market expectations of $8.01 billion. ## * * The overall Microsoft is still stable, but AI has not exerted its strength as expected * * Compared with the jubilant Alphabet-C next door, Microsoft, which has been singing for more than half a year this year, is a bit tepid this time. If one word is used to evaluate the performance of a Microsoft, the word "stable" may be the most appropriate. The Microsoft key performance indicators for the quarter, while not stunning, were above market expectations. According to the Microsoft financial report, revenue in the fourth quarter was $56.2 billion, up 8% from the same period last year. Although it was less than the double-digit growth in the same period last year, it was still higher than the market expectation of $55.49 billion. Net profit increased by 20% to $20.1 billion, with diluted earnings per share of $2.69, up 21% from the same period last year. But for the fiscal year as a whole, **Microsoft has underperformed slightly this year. Annual revenue was $211.9 billion billion, up 7% year-on-year, but the indicator has maintained double-digit growth in the past five fiscal years. * * From the perspective of sub-business, Microsoft's productivity and business process department (including Office productivity software, LinkedIn and Dynamics) achieved revenue of US $18.29 billion, up 10%, exceeding the expected revenue of US $18.06 billion. Among them, office consumer products and cloud services revenue increased by 3% year-on-year, Microsoft 365 consumer subscriptions increased to 67 million, and LinkedIn revenue increased by 5% year-on-year. The more personal computing business, which includes Windows, devices, games and search advertising, saw revenue of $13.91 billion, down about 4% year-over-year. Among them, Windows operating system revenue fell 12% year-on-year; hardware equipment revenue fell 20% year-on-year; Windows commercial products and cloud services revenue increased 2% year-on-year; search and news advertising services revenue increased 8% year-on-year. It may be seen from this that * * Bing search has brought obvious growth after integrating AI, but the ability of AI at the Windows system and Office level to drive revenue has not yet been shown. * *! Apart from AI's failure to exert as expected, the performance of Microsoft Cloud this time did not satisfy the market. Although the Microsoft intelligent cloud business revenue in this quarter still increased by 15% year-on-year to $23.99 billion, higher than the market expectation of $23.8 billion. However, Azure and other cloud services grew by only 26%, compared with 31% in the previous quarter, which shows that Azure has slowed down for several consecutive quarters, raising concerns about whether the cloud business has entered a period of weak growth. You know, Azure has maintained a continuous high growth rate of 50% during the outbreak. In a subsequent call, Microsoft seemed to prove this concern. **Microsoft expect Azure revenue growth of 25% to 26% in the first quarter of fiscal year 2024, which also means that the growth rate of cloud business will further slow down. **In addition, Microsoft also gave slightly pessimistic performance guidance, with smart cloud revenue expected to be $233-23.6 billion, personal computing revenue of $125-12.9 billion, and productivity and commercial revenue of $180-18.3 billion in the next quarter, all falling short of market expectations. However, the growth of the cloud business is not as strong as expected, but its importance to the Microsoft is clearly increasing. During the call, Nadella said that Microsoft Cloud's annual revenue exceeded $110 billion, with Azure accounting for more than 50% of total revenue for the first time. In addition to revenue, there is particular concern about whether Microsoft spending caused by AI is increasing significantly this quarter. This is also true. Microsoft spent $8.94 billion in the last quarter, which was higher than the market expectation of $7.85 billion. Microsoft said at the conference call that * * the company expects 2024 capital expenditure to increase quarter by quarter in fiscal year 2024, mainly in data centers, CPU chips, GPU chips and network equipment, and also sends a signal that AI investment will continue to increase as Alphabet-C. **Microsoft shares fell more than 3% at one point after the session due to slowing growth in the Microsoft cloud business and low performance expectations.! Although AI investment has not yet been reflected in this quarter's results, Nadella has also made it clear that he will continue to increase his AI investment strategy. He said the Microsoft remains focused on leading the new AI platform shift, helping customers get the most value from their digital spend using the Microsoft cloud and increasing operational leverage. Overall, **although last quarter was the climax of generative AI, AI is currently not bringing the expected returns to Alphabet-C and Microsoft. **But judging from the statements of the two companies, the route of increasing AI investment will not change. Perhaps the real AI war has not yet begun.