#Learned #Weeks #Big #Tech #Earnings
Key takeaways
- Technology companies have dramatically increased their infrastructure spending this year as they raced to meet growing demand for artificial intelligence and cloud computing.
- Most cloud providers said that despite all this spending, they are struggling to keep up with demand.
- AI has fueled growth in cloud computing units and, according to executives, is lifting sales and metrics in other segments of their business.
The AI boom at big tech companies is still ongoing.
Artificial intelligence was the focus of the five giant tech companies, with a cumulative value of more than $10 trillion, that reported quarterly earnings this week. Executives at Apple (AAPL), Microsoft (MSFT), Alphabet (GOOG; GOOGL), Amazon (AMZN), and Meta (META) praised the progress their companies have made in integrating AI into their operations and rolling out new AI features to customers. They also spoke about the strong demand for AI, and the challenges they faced while trying to meet it.
Investors are now turning their attention to the last of the Big 7 companies to report: Nvidia (NVDA), which is scheduled to report results on November 20. Its shares rose to a record high last month as investors expected this week’s earnings to contain evidence of prosperity. Demand for its AI chips.
Spending on AI infrastructure is increasing…
Big Tech spending on infrastructure has risen significantly this year. Cloud providers have raced to build their own AI operations and meet the growing demand for cloud computing.
Microsoft, Alphabet, Amazon and Meta spent a total of $60 billion on property and equipment in the third quarter, a 60% increase from the same period last year, according to a new report. Investopedia analysis. All four indicated that investments in infrastructure will continue to increase in the coming year.
Rising infrastructure costs hung over the tech giants during the last round of earnings reports in July, when Wall Street was eager to see evidence that investments were paying off. Those concerns appear to have faded somewhat with this week’s reports.
…But the clouds can’t grow fast enough
A common refrain from tech executives this week was that they can’t keep up with demand.
Microsoft warned on Wednesday that growth in its cloud unit may slow in the fiscal second quarter. Demand for AI “remains higher than our available capacity,” according to CFO Amy Hood.
Her comments were echoed by Amazon CEO Andy Jassy on Thursday, who said Amazon Web Services is also having difficulty meeting demand for cloud computing.
Jassy said the shortage of more advanced semiconductors was the main bottleneck.
The growth of artificial intelligence boosts business
Despite capacity limitations, AI continues to drive growth for tech giants.
Microsoft CEO Satya Nadella said the company’s AI business is on track to reach an annual run rate of $10 billion in the current quarter, making it “the fastest company in our history to reach this milestone.” Amazon’s AI business is growing by triple-digit percentages, three times faster than early-stage cloud computing, Jassy said Thursday.
Alphabet executives said they expect AI investments to translate into revenue in the fairly short term. AI overviews in Google Search are being monetized “at about the same rate” as legacy formats, he said, boosting confidence that AI can boost Alphabet’s core advertising business as well as its cloud unit.
Meta has also touted the benefits it sees from AI. CEO Mark Zuckerberg said that AI-based feed recommendations have increased the time users spend on Facebook and Instagram this year, and that companies using Meta’s AI-generated advertising tools have seen an increase in conversions.
Apple reported record September quarter iPhone sales and total revenue on Thursday. CEO Tim Cook noted on a call with analysts that iPhone users were adopting Apple’s latest operating system, iOS 18.1 powered by Apple Intelligence, at twice the rate of its predecessor, which the company saw as an early indicator of strong demand for personalized AI. .
#Learned #Weeks #Big #Tech #Earnings
