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It's earnings season, when the big tech companies release their figures. While there's little doubt the economy is slowing down, an investment in AI is starting to pay off for one of the biggest of the big companies, notably Microsoft and its investment in OpenAI.
The company reported revenues of $56.5 billion, up 13% over the same period last year, while net income was 27% higher at $22.3 billion.
Demand for artificial intelligence has in large part driven the company's earnings over the last quarter and will likely continue to do so in the coming quarter.
In fact, during his Q1 2024 earnings call, CEO Satya Nadella noted that the company's paying customers for its 2-year-old GitHub Copilot software rose by 40% in the September quarter over the same quarter last year.
He also noted roughly 40% of the Fortune 500 companies are already using the text version of Copilot, even though Copilot is only going to general release over the coming months. Worth noting here is that Copilot for Microsoft 365 will be available as of Nov. 1.
Microsoft’s Intelligent Cloud business produced $24.26 billion in revenue, up 19%.
He also revealed that 18,000 organizations are currently using the company’s Azure OpenAI Service, 37,000 organizations have subscribed to Copilot for Business, and 126,000 organizations are using Copilot in Power Platform to date. Its productivity and business processes business improved 13% over the same period last year to $18.6 billion, but most analysts are waiting for the next quarter results when the full impact of Copilot on the company’s bottom line is known.
This business consists of Microsoft 365 productivity apps, LinkedIn and Dynamics enterprise software. The company reports its Teams communication app now has more than 320 million monthly active users, up from 300 million six months ago.
“We are rapidly infusing AI across every layer of the tech stack and for every role and business process to drive productivity gains for our customers,” said Nadella during the earnings call.
However, CFO Amy Hood was cautious about talking up the possible revenue impact of Copilot in the immediate term, even though the $30/per user/month productivity Copilot in Microsoft 365 available from next week. Instead, she said the company expects “related revenue to grow gradually over time,” once it is released.
Google Still Waiting for GenAI Payout
For Google, though, Q3 was a completely different experience. While the company noted demand for its products from enterprise clients has been brisk, it has a large portfolio of smaller companies and startups that have been tightening purse strings over the past quarter.
According to Reuters, the slow roll-out of its AI services through the Vertex platform also hampered it. While the company is trying to speed up the process by moving its Deep Mind team from research to product releases, it is unlikely we'll see any major news from Google about generative AI soon.
In fact, in the earnings call for 2023 Q3, Google CEO Sundar Pichai said it will be “next year” before Gemini is released, without offering more specifics on timing. Gemini is Google’s answer to OpenAI's GPT-4 and offers a multimodal AI model that is expected to push Google’s natural language processing capabilities forward by leaps and bounds.
Google has also heavily invested in the AI startup Anthropic and partnered with Meta’s Llama models to offer a variety of models to its cloud users. However, while these will attract smaller companies it is unclear if it's enough to land enterprises. Microsoft produced its strong results based on enterprise clients, so for Google to move forward, it will have to capture that market.
"Microsoft is using its incumbent software relationships, whereas Google is coming in as a little bit of a challenger here," Krishna Chintalapalli, portfolio manager at Parnassus Investments, an investor in Alphabet and Microsoft, told Reuters.
Overall, Alphabet reported revenue growth of 11% and a return to double digit growth in more than a year.
Despite this, Google Cloud performed well and views AI as pushing this forward in the long-term.
While cloud revenues came in below estimates at $8.41 billion, it only missed the mark by $20 million.
However, it grew 22% from a year earlier, which is double the rate of growth for the rest of the company. It also reports an operating profit of $266 million after losing $440 million in the same period a year earlier.
Meanwhile its ads business is still buzzing, underlined by the fact that its search business earned $44 billion, an 11% jump year over year.
Figures are just figures, but here they are important in that they underscore the lack of growth in its AI development over the year. But the game is hardly up.
“We’re continuing to focus on making AI more helpful for everyone. There’s exciting progress and lots more to come,” said Pichai.
Meta’s Reality Labs Continues to Struggle
Our final stop on the earnings circuit is Meta, whose ongoing push to the metaverse continues to rack up losses.
Its Reality Labs business, which develops augmented and virtual reality technologies, reported operating losses of $3.74 billion with revenues from the AR and VR units dropping 26% from $285 million at the same time last year to $210 million.
The company anticipated these losses back in July, when Meta CEO Mark Zuckerberg warned during its Q2 figures release that costs around its Quest 3 VR headset are likely to continue to rise.
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"For Reality Labs, we expect operating losses to increase meaningfully year-over-year due to our ongoing product development efforts in augmented reality/virtual reality and investments to further scale our ecosystem,” the company stated at the time.
The Quest 3 headset only came out in September, so it’s unlikely we will see its progress until the next set of figures. However, it costs a relatively modest $499 compared to the older high-end Quest Pro VR headset, which retails at about $1000. The headset might also receive a residual bump after Apple releases its $3500 VR offering in the first quarter of 2024.
However, the workplace applications for such headsets remain unclear and will be a hard sell to companies looking to keep spending down.
Even still, Meta globally posted another set of positive figures with earnings of $11.58 billion, up from $4.4 billion a year earlier. Revenue rose 23% to $34.15 billion from $27.71 billion.
The number of monthly active users of its apps, including Facebook, Instagram, WhatsApp and Messenger, was 3.96 billion as of the end of the quarter, up 7% from a year earlier. Zuckerberg also said its new Threads app, which launched in July, has 100 million monthly active users.
Cisco Improves Webex’s GenAI Reach
Away from this week’s figures, Cisco announced several new updates for its Webex platform as well as a new strategy for it which — of course — involves generative AI.
The new releases were announced at this week’s WebexOne conference, where Cisco distinguished engineer Keith Griffin explained that the new releases are focused on video intelligence, audio intelligence and language intelligence.
“Our intent here is to is to apply this across the entire Webex suite, from our devices to our contact center and the Webex connect control hub, really everywhere you would need an assisted experience,” he said.
Cisco Collaboration SVP and GM Javed Khan SVP and GM of Cisco Collaboration noted in a post about the releases that while the Webex platform has been leveraging AI for years, this time it’s different. Namely, the company has added pervasive, generative AI across the Webex platform through a new AI Assistant that will enable users catch up meetings summarize an hour-long meeting recording into just a minute, or even identify and solve a customer support issue before it’s submitted.
The AI in the Webex platform, he wrote, will be low touch or even zero touch for many use cases and will be seamlessly integrated into the tools already in use in organizations.
It also announced AI Codec, a generative AI solution that the company claims will solve poor audio quality even with poor network conditions, while using a fraction of the bandwidth. Along with AI Codec, the company is also releasing machine learning techniques to improve video quality using super-resolution, an industry-standard technique for delivering high-definition meetings with high video quality regardless of bandwidth conditions.
Finally, it introduced Real-Time Media Models (RMMs) which will further enhance the audio and video quality users experience on calls. The models can take multiple media streams and produce multiple outputs.
These were the main releases for communications in the digital workplace among a number of announcements from the company, and they feed into Cisco’s vision of hybrid workplaces and hybrid work.
“Implementing hybrid work successfully is hard, and unfortunately, for many organizations, it is broken. Hybrid work is both different and harder than when most people worked in the office or when most people worked remotely," wrote Khan. "The role of the office is still changing, and we’re still learning how to be inclusive when some people are in the office and others are not.”
These releases are designed to bridge this gap. The new capabilities are in various stages of availability, with shipping planned to begin before the end of 2023.
Sinequa Expands Google Cloud Partnership
Intelligent search developer Sinequa announced the expansion of its partnership with Google Cloud, with the addition of the latter's generative AI capabilities into Sinequa.
The combination of the conversational abilities from Google Cloud’s Vertex AI platform and Sinequa’s search platform gives organizations the ability to apply generative AI to its content to deliver better insights.
Sinequa's generative AI strategy is based on an agnostic approach that ensures compatibility with a number of generative AI APIs. Sinequa now supports Google Cloud's Vertex AI Platform and its growing library of large language models (LLMs) such as PaLM-2.
The new partnership brings Google Cloud's generative AI technologies seamlessly into the Sinequa ecosystem through a technique known as Retrieval-Augmented Generation (RAG).
To showcase the power of this integration, Sinequa’s integration of Vertex AI is featured at Cloud Space | Paris in the brand-new Google Paris office and will expand to other Cloud Space locations. Sinequa is available on Google Cloud Marketplace.
Lenovo and Nvidia Offer GenAI Everywhere
Finally this week, Lenovo and Nvidia announced that they too are deepening their existing partnership. The goal here is to improve access to generative AI through new systems that will bring AI-powered computing to wherever data is created.
While multiple offerings are already available that help organizations access their data to build generative AI tools, this partnership, according to a statement from Lenovo, will enable organizations to take data from their edge installations in the cloud to their existing siloes.
The announcement was made at Lenovo Tech World Austin. The event focused on the need for end-to-end solutions that bring together accelerated systems, AI software and expert services to help businesses build LLMs ready to tackle business challenges.
Lenovo also outlined its new vision for generative AI under the banner "AI for All," as well as a $1 billion investment in AI. The AI for All approach encompasses hybrid AI where public, private and personal foundation models will co-exist to enable the development of LLMs.
In practical terms this means that Lenovo AI can operate within a device or securely with on-premises servers and through the proprietary data of an enterprise or individual.
At the same time, this will ensure that Lenovo AI learns from data provided by an individual user or through the proprietary data of an enterprise, but ensures no information is shared publicly or enters open training data sets.