Both Microsoft and Google’s parent company, Alphabet, have reported higher than expected revenue in their latest quarterly results.
Microsoft recorded revenue of $56.5bn (£46.4bn) in the three months ending September, a 13% increase compared to the same period last year and surpassing analysts’ prediction of $54.5bn (£44.8bn).
The rise in revenue was attributed to the strength of Microsoft’s cloud computing and PC businesses.
Meanwhile, Alphabet reported a revenue of $76.7bn (£63bn) for the same three-month period, an 11% year-on-year increase, also exceeding the estimated figure of $75.97bn (£62.5bn).
However, Alphabet’s performance was labeled as “disappointing” as its cloud computing division reported a revenue of $8.4bn (£6.9bn), $20m (£16.4m) less than expected. The division’s quarterly growth also decreased from 28% to 22.5% compared to the previous three months.
Both companies announced their results after the close of the US stock markets on Tuesday afternoon.
In after-hours trading, Microsoft’s shares rose by 5%, while Alphabet’s stock fell nearly 5%.
This comes as tech firms race to leverage artificial intelligence (AI) to increase profits and expand their range of services for customers.
The results revealed that revenue from Microsoft’s Intelligent Cloud unit, which includes its Azure cloud computing platform, reached $24.3bn (£20bn), also surpassing expectations.
While Microsoft is still developing many of its AI services, Azure is expected to play a key role.
The company has also gained an early advantage over competitors by investing in startup OpenAI, the owner of the popular ChatGPT chatbot service.
Jesse Cohen, a senior analyst at Investing.com, stated that the company’s results “indicated that artificial intelligence products are stimulating sales and already contributing to top and bottom-line growth.”
However, Cohen noted that investors were disappointed by the relatively weak performance of Google’s cloud platform, which he believes is at risk of falling behind its competitors.
Tech giants have also been impacted by the sluggish global economy. Earlier this year, both companies announced plans to reduce thousands of jobs globally, with Alphabet cutting 12,000 positions and Microsoft eliminating 10,000 roles.
Microsoft is hoping to further improve its fortunes with its £56bn ($69bn) acquisition of gaming company Activision Blizzard, which recently cleared its final regulatory hurdle.
The company first announced its bid to acquire the developer, known for popular franchises like Call of Duty, in early 2022 but faced resistance from the regulator, the Competition and Markets Authority.
Fellow tech giant Meta, the parent company of Facebook, is set to announce its latest results on Wednesday, while Amazon is scheduled to do the same on Thursday.