San Francisco Frontiers - Google-parent Alphabet soars as Meta stumbles over AI costs

The earnings -- along with reports from Microsoft and Amazon -- came as AI titans pump billions of dollars into cloud computing and artificial intelligence, vying to lead in technology that they insist will transform all aspects of life.

Shares in Alphabet rose by more than six percent in after-hours trading as investors lauded the company's success in making the pivot to AI and solid revenue across its major divisions.

The tech giant reported a profit of $62.6 billion on revenue just shy of $110 billion, easily eclipsing the same period a year earlier and beating market expectations.

Shares of Alphabet, maker of Gemini AI, have risen 26 percent in the past six months while rivals Meta and Microsoft have watched their shares dive nearly 11 percent and 22 percent respectively in the same period.

"Alphabet remains one of the top names in the AI Revolution given the vertically integrated approach across Search, YouTube, and its ad cohort which continues to accelerate," said Dan Ives of Wedbush Securities.

Social media behemoth Meta, which rivals Google for advertising revenue, meanwhile saw its shares slide by more than six percent, despite topping earnings expectations for the recently ended quarter.

Meta sent tremors through its results by announcing that expenses at the tech giant notched up to $33.4 billion as it chases "superintelligence," including a hiring spree for top AI talent.

Meta also increased its projected capital spending -- mainly for data centers -- for the year by $10 billion, to a new range of $125 billion to $145 billion.

The company reported a profit of $26.8 billion on revenue of $56.3 billion in the quarter.

AI investments from the company that owns Instagram and Facebook are not directly tied to a revenue stream as with Amazon, Microsoft and Google, which sell AI capabilities to cloud clients.

Meta has moved to rein in costs to help fund its AI ambitions, announcing last week that it would cut roughly 8,000 jobs and leave 6,000 open roles unfilled.

- Stock jitters -

While investors are wary of whether spending fortunes on AI is financially shrewd, companies insist it is justified by seemingly insatiable demand, a position Wall Street mostly supports even if shares in some of the tech giants have struggled in recent months.

Microsoft also reported quarterly revenue and earnings ahead of Wall Street expectations Wednesday, powered by demand for cloud computing and artificial intelligence services.

The tech giant posted revenue of $82.9 billion for the quarter ended March 31, up 18 percent from a year earlier and topping analyst consensus forecasts. Net income climbed 23 percent to $31.8 billion.

CEO Satya Nadella said Microsoft's AI business has surpassed a $37 billion annual revenue run rate, a figure that takes a recent period's revenue -- typically a month or quarter -- and extrapolates it out to a full year.

But the company founded by Bill Gates saw its shares drop by more than two percent after its earnings post, before seeing that loss largely erased. Microsoft's stock was down about 12 percent this year through Wednesday's close.

Amazon meanwhile reported a sharp rise in first-quarter profit, saying that its investment in artificial intelligence startup Anthropic supercharged the bottom line.

The Seattle-based e-commerce and technology colossus said net profit jumped to $30.3 billion in the three months ended March 31, nearly doubling from $17.1 billion a year earlier.

Amazon has struck deals with OpenAI and Anthropic that commit the two AI labs to spend more than $100 billion on AWS cloud services in the coming years.

Amazon shares rose more than four percent in after-hours trading.

N.Wilson--SFF