In AI, Microsoft is outdoing its biggest rival, Google. That’s the big takeaway from the two tech giants’ September-quarter results, released Tuesday. Growth at Microsoft’s Azure cloud unit—and the company generally—accelerated in the quarter, which executives credited to higher-than-expected consumption of AI-related services. Yet in the same quarter, growth at Azure’s smaller rival Google Cloud slowed by nearly 6 percentage points. The most likely conclusion is that Google Cloud isn’t yet benefiting much from the rollout of various AI-powered services. Instead, comments from Google executives suggest the cloud unit is suffering as customers trim their spending, a trend that has been underway across the industry for several quarters.
You had to feel a little sorry for Alphabet CEO Sundar Pichai. While he commented on Google’s earnings call that Google was “definitely seeing a lot of interest in AI,” Microsoft CEO Satya Nadella spent the first few minutes of his earnings call reeling off a bunch of statistics about all the ways customers are using Microsoft’s AI services. Microsoft’s outperformance shouldn’t be a huge surprise, given its partnership with OpenAI, the firm that sparked the generative AI gold rush a year ago. That partnership has powered a variety of Microsoft products, giving Microsoft an edge over rivals such as Google and OpenAI itself (despite their partnership, Microsoft and OpenAI compete, and as we reported today, OpenAI is losing some business to rivals.) For more on the quarterly results of Google and Microsoft, see here and here.
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