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It was the Super Bowl of quarterly tech earnings today, with March-quarter results from Google, Microsoft, Amazon and Meta Platforms. The tsunami of numbers, all released within a few minutes of each other, might overwhelm even a top AI model. But for a human, what was clear was that surging demand for AI computing capacity is lifting cloud revenue growth across the industry. One wet blanket, though: Much of the computing demand is likely coming from the biggest AI firms, like Anthropic and OpenAI, so perhaps we shouldn’t get too excited.
As Amazon CEO Andy Jassy said, “It’s no secret that…the AI labs are spending an incredible amount of money on compute.” He added, though, that there’s also a fair bit of regular business demand for AI, which is of course vital if the AI revolution is to pay for itself. Meanwhile, the results also showed that AI technologies are boosting the ad businesses at ad giants Meta and Google. That’s the good news.
The bad news is that the investment cost to deliver computing capacity continues to rise. Both Meta and Google lifted their already-hefty projections for capital expenditures for this year by a few billion dollars—Meta now projects as much as $145 billion, while Google projected up to $190 billion. And Google said its capex would grow substantially next year as well! Investors don’t appear too worried about Google, given that its cloud business rocketed 63% in the quarter, while search advertising growth accelerated to 19%.
Even better, Google said its backlog of cloud business doubled in the quarter to $460 billion, providing some assurance that Google Cloud will continue growing at a red-hot pace. And some of that is thanks to sales of its TPU AI chips. Instead of Google just using TPUs in its own data centers, it’s starting to sell them to others (as we reported last year). Shares of Google rose 7% in after-hours trading.
Meta is a different story. Meta, of course, doesn’t have a cloud business to justify its massive spending, although CEO Mark Zuckerberg told analysts it was using its new Spark AI model to improve its ad businesses. Its ad revenue growth suggests AI is helping a lot. But investors didn’t seem convinced the steadily growing capex spending is warranted: The company’s stock dropped 6.6% after hours.
Investors were more comfortable with Amazon, whose big Amazon Web Services cloud business lifted its revenue growth rate four percentage points to 28%, while its massive online shopping business also showed stronger growth. Unlike the executives of Meta and Google, Amazon’s Jassy said his capex projection wasn’t changing, although the company was already planning to spend more on capex this year—$200 billion—than the others. Like Google, Amazon also has a good story to tell about demand for its Trainium AI chips. Amazon shares were up more than 3% in after-hours trading.
Microsoft Azure’s growth rose by one point, to 40%, which would be a red-hot growth rate in normal times, but that rate of improvement is less impressive compared to Google’s and Amazon’s. Both of those companies are cloud providers for Anthropic, so they’re likely benefiting from surging demand for Anthropic’s Claude.
Microsoft late last year struck a deal with Anthropic, so it may soon be partying as hard as Google and AWS. Microsoft CEO Satya Nadella said the Microsoft 365 Copilot AI service now has 20 million subscribers, up from 15 million in the December quarter. That’s a positive sign for the company’s ability to expand its software business with AI. But 20 million is still a small portion of its 400 million 365 customers. Investors had a lukewarm reaction to Microsoft's results—the stock was down slightly in after-hours trading.
The bottom line: Google and Amazon in particular appear to be making a lot of progress. The jury is still out on Microsoft. And Meta has a lot to prove.
• Blackstone is folding its growth equity business into a new unit called BXN1 that will focus on AI-related investment, according to an internal memo reviewed by The Information.
• Anthropic has received investment interest at a valuation above $900 billion, according to a person familiar with the matter. An investment at that level would more than double the company’s February valuation of $380 billion.
• Meta is launching stablecoin payouts for creators, using Stripe as its payment provider, according to its webpage.
• The CEO of T-Mobile, the only mobile network in the U.S. to offer SpaceX’s Starlink Mobile for backup service in areas not served by cell towers, says the service is seeing “a lot less usage” than T-Mobile had originally expected.
• The European Commission said Meta has failed to prevent children under 13 from accessing its Instagram and Facebook services as it is required to do, potentially breaching the region’s law.
• PayPal is reorganizing its corporate structure to make Venmo a stand-alone business unit, CNBC reported Wednesday, making it easier to sell off.
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