Overnight, the US GDP for the first quarter was far lower than expected and the PCE annualized quarterly rate, which rebounded significantly, further dampened market sentiment. The “New Federal Reserve News Agency” even commented that the Federal Reserve's dream of cutting interest rates is far away.

However, after the market ended Thursday's trading in a gloomy atmosphere, the glory of AI quickly dispelled the shadow that the Fed would not cut interest rates.

Tech giants$Microsoft (MSFT.US)$,$Alphabet-A (GOOGL.US)$/$Alphabet-C (GOOG.US)$Both surrendered impressive results after the market, igniting market sentiment. As of press release, Microsoft is up more than 4% at night, and Google is up more than 11%. If this trend continues, Google will hit a new high tonight.

So, what are the highlights of these two giants' performance this time around? Why are they both able to soar?

Google: Performance exceeds expectations+first quarterly dividend in history+$70 billion buyback

Google's post-market surge has shown that the market is very satisfied with this financial report. Looking at overall results, Google's parent company's total revenue for the first quarter was US$80.54 billion, up 15% year on year, the fastest growth rate since the beginning of 2022, and net profit jumped 57% year on year to US$23.66 billion.

In terms of business segments, advertising revenue in the first quarter was 61,659 billion US dollars, an increase of 13% over the previous year. This is also the main revenue driver of Google that Wall Street is closely watching.

Among them, advertising revenue from the YouTube video platform increased nearly 21% year over year to 8.09 billion US dollars; Google search and other advertising revenue increased by more than 14% year over year to 46.156 billion US dollars.

These all indicate a steady improvement in its advertising revenue. Google's core advertising business weakened due to the weak economy in 2022 and increased competition from TikTok, but advertising revenue has been improving since it was announced that the business experienced negative growth in the fourth quarter of 2022.

Furthermore, the cloud business, which the market is most concerned about and is regarded as Google's next growth engine, achieved revenue of 9.57 billion US dollars, an increase of 28.4% over the previous year. This also represents a new acceleration in the year-on-year growth rate of Google Cloud revenue.

Also, in terms of AI investment, which has received much attention, Google's capital expenditure for the quarter was 12 billion US dollars, 1.7 billion US dollars more than expected.

Google's chief financial officer said the company will spend about 12 billion US dollars or more on capital expenses each quarter this year, most of which will be used to build new data centers.

However, unlike Meta, Google's investment is being converted into revenue, as can be seen from Google Cloud's revenue. Because Google Cloud carries most of the company's artificial intelligence technology.

In terms of operating profit, Google Cloud has more than quadrupled to 900 million US dollars in the latest quarter, which shows that after investing in the business over many years to catch up with Amazon Web Services and Microsoft Azure, Google has finally generated considerable profits.

Furthermore, another driving force behind the sharp rise in Google's stock price was Google's decision to pay a quarterly dividend for the first time, and authorized an additional 70 billion US dollars of shares to be repurchased.

However, according to some analysts, the number of employees is probably the most important figure in this financial report. Google also (following Meta) began a year of efficiency. The number of employees decreased by nearly 10,000, and the operating profit margin jumped from 25% to 32%.

It is worth noting that unlike Meta, which has already gone through the layoff dividends, Google's layoffs started late, and Q1 progressed again after being suspended last quarter, so there may be layoffs that will drive profit margins in the future.

However, there are also market opinions that as the first quarter results become a thing of the past, Google must now meet higher expectations. As competitors are launching more generative artificial intelligence products, these expectations will only get higher and higher.

Microsoft: Overall performance exceeded expectations, and the cloud business grew at an accelerated pace

According to Microsoft's latest results, total revenue for the first quarter of the 2024 calendar year was US$61.86 billion, up 17% year on year; net profit was US$21.94 billion, up 20% year on year.

By business, the revenue of the smart cloud business unit increased 21% year-on-year to US$26.7 billion in the first quarter, which is about 18% higher than the company's guidance, and 20.4% higher than the previous quarter's growth rate.

Among them, revenue from Azure and other cloud services increased by 31%, higher than market expectations of 28.6%, as well as a growth rate of 29% in the third quarter of last year and a growth rate of 30% in the fourth quarter of last year, indicating that AI is indeed driving the accelerated growth of cloud revenue.

It is worth noting that artificial intelligence contributed 7 percentage points to Azure revenue this time, higher than the 6 percentage point increase in the fourth quarter of last year and the 3 percentage point increase in the third quarter of last year.

Quarterly revenue from productivity and commercial businesses, including Office software, increased 12% year over year to US$19.6 billion, and increased 13% to US$19.25 billion in the previous quarter.

Among them, revenue from Microsoft 365 Copilot artificial intelligence tools is included in the Office commercial product line. Office 365 commercial revenue increased 15% during the quarter, resulting in a 13% increase in revenue from Office commercial products and cloud services (12% increase at a fixed exchange rate).

The personal computing business unit's quarterly revenue increased 17% year over year to US$15.6 billion, higher than market expectations.

Additionally, Microsoft's AI-driven capital expenditure for the third quarter was nearly $1 billion higher than analysts' expectations.

Microsoft's chief financial officer Amy Hood said the company's capital expenditure for the most recent quarter was $14 billion and is expected to continue to increase “significantly.” It also pointed out that Microsoft expects its operating profit margin to “drop by only one percentage point year over year, even if it invests heavily in cloud and artificial intelligence.”

Senior investing analysts said that Microsoft is far ahead of everyone in today's critical market segments, and most importantly, it is also on the right path to expanding its leading position.

Cow friends,

Google and Microsoft both handed over impressive results!

Can it drive US stocks to the dawn?

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