Artificial Intelligence and Cloud in Focus as Big Tech Companies Announce Financial Results

Shares of US tech giants have seen volatility this week as investors try to assess whether artificial intelligence will fill coffers or empty them.

Analysts say that while it is important to stay on top of the latest trends when investing in AI, the market wants the strong financial engines of tech companies to pay for it.

Apple and Amazon are the latest giants whose quarterly earnings were scrutinized on Thursday to gauge the performance of their core businesses and whether their cloud computing and artificial intelligence strategies are paying off.

Amazon said its profit doubled in the recently ended quarter thanks to a resurgence in its AWS cloud computing business.

Revenue for AWS’s cloud computing unit rose, but the e-commerce giant’s sales of $148 billion fell just short of lofty market expectations, and shares fell after the close.

Money earned from advertising on Amazon also turned out to be lower than expected.

Retail, advertising and cloud computing are considered Amazon’s financial pillars.

“While Amazon has many levers it can pull, the outlook is becoming increasingly challenging,” said Neil Saunders, managing director of GlobalData Retail.

“Amazon will continue to be very profitable, but the pace at which it can grow profits appears to be slowing,” he said.

Amazon — like other tech giants investing in AI — is also spending more money, a factor that investors are closely watching.

“We are very optimistic about the medium- to long-term impact of AI on every industry you know and can imagine,” Amazon CEO Andy Jassy said on a conference call following the earnings call.

“Generative AI in particular is quite iterative, and companies need to build their strength around how best to solve real customer problems,” Jassy said.

Apple Intelligence

Apple reported quarterly profit rose from a year earlier, topping analysts’ forecasts and boosting its shares in after-market trading.

Apple’s services division’s revenue from digital goods and subscriptions hit a record high, with the iPhone maker setting a new record for overall revenue in the June quarter, according to CEO Tim Cook.

Cook addressed the upcoming public launch of Apple Intelligence, referring to the company’s suite of AI features.

“Apple Intelligence builds on years of innovation and investment in artificial intelligence and machine learning,” Cook said during the earnings conference call.

“This will change the way users interact with technology,” he added.

Apple has come under pressure to convince skeptics of its AI strategy after Microsoft and Google quickly launched their products.

“For better or worse, Apple has aligned its AI efforts with other key parts of its core business, most notably the iPhone,” said Emarketer analyst Jacob Bourne.

He added that the effectiveness of AI investments will likely be measured by sales of Apple hardware and services.

Take advantage of this moment

Meta on Wednesday announced earnings that beat market expectations, sending its stock price higher.

This impressive profit was achieved despite the company’s virtual and augmented reality division Meta Reality Labs reporting a loss of $4.5 billion, which was higher than analysts had expected.

“We’re in a good position because the strong results we’re seeing across our core products and businesses give us the ability to make deep investments for the future,” Meta founder and CEO Mark Zuckerberg said during an earnings conference call.

“I plan to make the most of this opportunity.”

Microsoft and Google

Microsoft shares fell this week after earnings data showed its key cloud computing division was not growing as strongly as expected.

Shares of Google owner Alphabet fell on concerns that advertising revenue was falling and costs were rising after it released financial results.

“Meta stands out from other tech companies with AI ambitions because it already generates massive revenue from digital advertising,” said Sonata Insights founder and principal analyst Debra Aho Williamson.

“Unlike Google, which has struggled to make changes that will impact its core advertising business, most of Meta’s AI investments are aimed at improving the way ads work on its sites or creating new features that could ultimately become revenue drivers.”

© 2024 AFP