Column: “Earning power” with AI, which makes a difference in the evaluation of major IT companies in the market | Reuters

Microsoft and Alphabet sit somewhere between Meta and NVIDIA. Microsoft, like Meta, is in some ways betting on an uncertain future. For example, a customer may eventually upgrade their business software “Office.” Analysts say capital spending this year should be more than $40 billion, double what it was three years ago, while sales growth is about half that pace. However, Microsoft is different in that it is also a seller of a gold-mining tool called Azure, a cloud service. Azure is used by companies such as OpenAI for learning and operating AI systems, and sales increased by 31% in the first quarter. The Intelligent Cloud division, which includes Azure, is now Microsoft’s largest and fastest-growing business.

Alphabet’s cloud division also posted a 28% revenue increase in the first quarter, with operating profit nearly five times higher than a year earlier. Thanks in part to the company’s decision to pay a dividend for the first time, its stock price rose about 13% in after-hours trading. Microsoft stock was also bought after the announcement of its financial results, and its price-to-earnings ratio based on expected EBITDA is about 70% higher than Meta.

It remains to be seen who will unearth the “gold mine” that will lead to real profits. However, until then, investors will actively evaluate companies that can make steady profits by selling tools, rather than pouring money into businesses that may or may not be successful.

●Background news

*Microsoft announced on the 25th that its first quarter sales were $61.9 billion, an increase of 17% from the same period last year. Earnings per share increased from $2.45 to $2.94.See more

*Alphabet’s first quarter results showed sales of $80.5 billion, an increase of 15% year-on-year, and earnings per share of $1.89, an increase of 62%. The company also announced its first dividend payment.See more

(The author is a columnist for Reuters Breakingviews. This column is written based on the author’s personal views.)

Our Code of Conduct: Thomson Reuters “Principles of Trust” New Tab opens new tab

Opinions expressed are those of the author. They do not reflect the views of Reuters News, which, under the Trust Principles, is committed to integrity, independence, and freedom from bias.