Big technology companies are experiencing a golden moment. They have achieved astronomical valuations on the stock market while competing with each other to lead the development of artificial intelligence. The new technology is already providing them with enormous revenue and benefits, either because they are the leaders in cloud computing or because they use it in their own processes to maximize their results. Some of them, however, have warned of the large investments they must make in data centers, which has generated fears about profitability. For now, those investments are being supported by record revenues and profits.
Alphabet, Apple, Amazon, Meta and Microsoft invoiced a total of 448,249 million dollars (about 412,000 million euros, at the current exchange rate) in the third quarter, after growing on average by 12.1% and all of them setting record income . Between the five, they also earned $96.72 billion, 11.9% more than a year before.
The aggregate profit growth would reach 24% if it were not for the fact that Apple has had to make an extraordinary provision of 10,246 million net dollars after losing in September the court battle over the tax exemptions it enjoyed in Ireland, considered illegal state aid. This provision has caused Apple, from one year to the next, to curiously go from being the first to the last in group profits.
The development of artificial intelligence and its applications, together with the migration of processes, is generating enormous demand for cloud computing and data centers. As demonstrated by last July’s Azure computing outage, the world can no longer function normally without them. Three companies lead the cloud computing business. Microsoft, with Azure; Amazon, with Amazon Web Services (AWS), and, at some distance, Alphabet, with Google Cloud, as a third party in contention. Google even reported Microsoft to the European competition authorities for what it considers an abuse of its dominant position and this week the war between the two giants has intensified with direct accusations by Microsoft against Google, in which it says that tries to discredit it before regulators with covert maneuvers.
In the midst of this fight, the business of the three is growing strongly in that segment. Microsoft, hand in hand with its alliance with OpenAI, is the one that has achieved greater integration of artificial intelligence and migration to the cloud of its different tools, platforms and services. Its star division, Azure, is growing at a rate of more than 30%, and the entire Microsoft Cloud billed 38.9 billion in the quarter, with an increase of 22%. This allowed the company to increase its revenue by 16%, to 65,585 million, and improve profit by 10.7%, to 24,667 million.
AWS, for its part, had a turnover of 27,492 million dollars in the third quarter, with a growth of 19%, which allowed Amazon to increase its income by 11%, to 158,877 million, the highest figure in the group. The e-commerce giant increases sales by 7% in its online stores and 5% in physical stores, but it has new sources of growth in addition to AWS. Commissions on third-party sales through its platform are growing by 10% and income from subscriptions by 11%, but it has also found a new mine in the provision of advertising services, largely associated with its store, which are growing. 19%. As it has also undertaken efficiency plans to cut costs, profits soared by 55%, to $15,328 million.
In the case of Google, the cloud computing division has also acted as a driving force, with a growth of 35%, up to 11,353 million dollars. Meanwhile, there is a certain slowdown in advertising revenue from its search engine and YouTube. Google faces regulatory scrutiny – the Department of Justice has even proposed splitting it up –, growing competition for advertising and the threat of artificial intelligence to dominance in its traditional service, as the launch of search functions shows. by ChatGPT. For now, it’s going from strength to strength. Billing grew by 15.1%, to $88,268 million, and profits soared by 33.6%, to $26,301 million, the highest among technology companies.
Meta takes a somewhat different approach. While developing its artificial intelligence tools, it is using new technology to improve the algorithm of its networks, retain its audience and improve monetization. With this, it has achieved record advertising revenues and increased its turnover by 18.9%, to 40,589 million dollars. Although the bet on the metaverse still does not bear fruit – it generates operating losses of more than 4,000 million dollars per quarter -, the company has the luxury of continuing to invest money in it, while managing to improve its profits by 35.4% , up to 15,688 million dollars.
Apple likes to say that artificial intelligence is already built into its devices in one form or another, but now it is trying to boost sales of its devices with new Apple Intelligence features. However, many of its main applications are still pending development. The company continues to have an enviable position thanks to the penetration of its devices and the loyalty of its customers and the iPhone continues to be a money-making machine, but it is falling behind the growth of the other large technology companies. In the summer quarter, its revenue grew by 6%, to 94.93 billion. If it weren’t for the tax hit, its profits would have increased by 8.8%.
The five companies face regulatory and competition challenges for alleged abuses of their dominant position, the development of which is uncertain.
The results of Nvidia, the fashionable technology giant, the big winner of the artificial intelligence race, have yet to be published. While the other big five compete with each other and grow strongly, they are all customers of the main microprocessor company. That is its great advantage.
