Yahoo Finance’s Brad Smith and Seana Smith recap the top takeaways from Microsoft’s (MSFT) and Alphabet’s (GOOGL) earnings call, including the artificial intelligence opportunities in search and how the tech companies are incorporating A.I. into a number of their existing platforms.
The demand for AI products remains strong, and Microsoft has surpassed 300 million monthly active users for Teams, with market share gains in all categories, said Seana Smith. Microsoft’s CEO Satya Nadella believes the company is ready to lead the AI platform wave and make the necessary investments to stay ahead of the competition.
Watch the video to hear Brad Smith’s take on Alphabet.
Key video moments:
00:00:22 – Microsoft and Alphabet stocks’ after hours moves
00:01:39 – Microsoft’s key takeaways
00:04:12 – Alphabet’s key takeaways
00:06:51 – Brad and Seana’s vibe check
00:08:35 – Wall st. vs. Main st.
Video Transcript
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BRAD SMITH: “After the Call” on Yahoo Finance starts right now. I’m Brad Smith alongside anchor extraordinaire Seana Smith. Earnings calls for the sultans of search just wrapped, Google and Microsoft. Seana, let’s take a quick look at the activity that we’ve seen here on the YFi Interactive after hours. We’ll start things off with Microsoft. We’ll take a look at that move.
And you’re seeing actually both of them highlighted here underneath of that end of day move. Intraday moved lower by about 2% to 4%. But in the after hours after these reports drop and even throughout the course of these earnings calls, you see Microsoft hold onto gains by about 8.8%. And then pivoting on over to Google or Alphabet, you’re seeing those shares hold onto gains, but down off of some of the move higher that we had seen to the tune of about 4% earlier in that immediate reaction. But Seana, we’ve got to start with Microsoft here this afternoon.
SEANA SMITH: We do. Because, Brad, when you take a look at the shares, like you were just saying, after hours, up just about 8%. It was an impressive call. It was an impressive quarter and a very impressive call. The Street was very excited about what they heard heading in to this call. There was lots of speculation, lots of anticipation just all about AI, what we would learn there, all about Azure, their cloud business there.
And it really met what the Street was looking for, that buzzword “AI” and how Microsoft is incorporating it into their business. It’s what people wanted to hear. Satya Nadella, the executives at Microsoft really delivering on that. And it comes back to the excitement, what its fueled, Microsoft, since the start of the year. So let’s get to my big takeaways.
First up is the demand for AI products. They remain strong right now, at least that’s according to Microsoft. They’re very pleased with the engagement, the interest that they are seeing from their customers and the feedback that they are getting so far.
Second up, we had the Teams usage. Now, this is something that we don’t talk about as much. Because maybe it’s not as sexy to talk about when we’re talking about everything with Microsoft and AI and the progress that they made there.
But a pretty impressive number that they put forward. Microsoft surpassing 300 million monthly active users for Teams. So an impressive milestone there for the company. And Satya saying that Microsoft continues to take market share across all of those categories.
And then bringing it back to AI and the growth there, Bing. Bing continuing to take share here in the US. We had Satya is saying that they were very encouraged by the feedback that they are hearing from Bing users that Microsoft is going to continue to keep incorporating their AI capabilities. So, certainly, it’s all about the AI race. That’s really what has been fueling some of this tech rally that we’ve seen so far this year.
And Satya, Brad, he did not hold back. He went after the leader, I should say, by a wide margin in search right now, Google, Alphabet. Let’s take a listen to what exactly Satya had to say about that.
SATYA NADELLA: As we look towards a future where chat becomes a new way for people to seek information, consumers have real choice in business model and modalities with Azure Power Chat entry points across Bing, Edge, Windows, and OpenAI’s ChatGPT. We look forward to continuing this journey in what is a generational shift in the largest software category, search.
SEANA SMITH: A generational shift and it’s hard to really saying that Microsoft is ready to lead this race. They’re ready to commit to leading this AI platform wave and make the investments that are necessary for Microsoft to stay in the lead on this race.
BRAD SMITH: Yeah, generational shift, that generative AI perhaps providing these companies here. You know, even as I think about some of the takeaways, as you were running through what Microsoft had to say, of course, they’re still trying to make Bing a thing. But if you ask our own tech reporter, Dan Howley, tech editor Dan Howley, he’s been using Bing a little bit more. And we’ll speak to him in just a little bit.
However, I do want to pivot and get to some of the takeaways here. And what I ultimately got from the Google, the Alphabet call– Alphabet, Google, whatever you’re calling them at home. There were a few things that really stuck out to me.
Number one, if we can get to these takeaways, first and foremost, it’s the AI-driven opportunities in search that they’re talking about here. And that’s what I’m going to weave into this second point there as they’re talking about the future being kind of artificial intelligence as a service. And here’s specifically what they said.
How different language learning models are being layered into cloud, how they’re being layered into cybersecurity and workspaces, even. And so they’re really kind of painting this picture of a future for a developer angle where other companies can leverage the language-learning models that they are able to build out and then sell those or license those out, similar to some of the other services that they do have as well.
They talked about a year of sharpened focus. I kind of gave that a hat tip to Mark Zuckerberg or Meta Platforms, a year of efficiency. And what that sharpened focus looks like, you can imagine cost restructuring. We already heard about some of that. And even with that sharpened focus, where the growth narrative is actually pointing right now.
And they spent a little bit of the time talking about cloud here and particularly where AI layered into the cloud, but also just the growth of cloud. And so that was one of the more positive sparks as that cloud business became profitable. And a lot of analysts really latching on to that particularly here.
And then they talked a lot about YouTube, YouTube Shorts too. I mean, my goodness. Breaking this down in two different measures here, YouTube, they talked about the content creation and AI and how that can be layered in for creators in the future. They talked about the NFL Sunday Ticket pricing.
OK, great. You’re trying to get some sports viewership. Understood. And that’s really where they’re looking to kind of link together the living room and really competing for that living room viewership from their end users and subscribers.
But here’s where it got interesting and I wanted to bring this full circle on the Shorts front as well. They talked about this strong creator momentum here, saying that daily uploads, they actually rose, by channel, 80% over the course of this past year. So that is something that they were asked a little bit more about later on the call, getting some questions about monetization trends, but really only offering up that they’re seeing engaging and conversion on ads across their Shorts.
So that’s something worth keeping an eye on. Also worth noting that the revenue for this quarter for YouTube, it actually declined year over year. So perhaps TikTok is taking a little bit of that market share. We know that the in-app purchase is huge for advertisers to really make sure that they’re being able to take advantage of it as well right here. Let’s also check in on some of these vibes. I’ve got to know, what was your vibe from this call, Seana?
SEANA SMITH: You know, my vibe was four out of five. Going into this, I did not think I was going to give anything as a rating over three. I was impressed. They were very bullish about what they’ve seen so far, the traction, their future investment plans.
And they’re really looking to lead this AI race. And I think that gives them a huge advantage. What about you, Brad?
BRAD SMITH: All right, I’m going to stick with the AI theme because that was really the core focus for so much of the call early on in the prepared comments here. And I do want to bring in another element into the chat. Here’s my vibe. My vibe overall was three out of five. And it was kind of a poker face type of call, I said that this essentially was for Alphabet.
Because they’re still waiting for some of the bets to really be monetized. On the long-term basis, we’re going to see exactly how that is layered into their existing search engine, how that’s layered into content creation on YouTube, and how they’re able to benefit from some partnerships that they’ve drummed up. One of those partnerships, such partnerships is NVIDIA. Interesting to see there. And I was tracking shares of NVIDIA as well after earnings dropped for these companies and after the call started.
And I mentioned on the Alphabet earnings call, you saw NVIDIA shares actually higher in after hours trading. Right now, they’re higher by about 2.7% in extended hours. Taking a look at that chart. And the mention that I’m noting here, they’re the only cloud provider– Google is the only cloud provider to announce the availability of NVIDIA L4 tensor core GPUs for inference AI workloads. So that particularly benefiting NVIDIA at least here and now, as Luther Vandross would say.
But we’ve got to keep it moving, keep it rolling along here. Let’s bring in Yahoo Finance’s tech editor Dan Howley to get his take on what took place between both of these calls. Dan had kind of one headphone in for Microsoft, one headphone in for Alphabet. Dan, what did you gather?
DAN HOWLEY: Yeah, I think it’s just a tale of two calls almost where Google was kind of a snoozefest. Microsoft, it sounded like they were all mainlining Red Bull the entire time, super amped on the AI discussion. And I think if you look at how both companies are trading right now, that’s kind of what you would expect based on those calls. Microsoft up more than 8%. Google just up 1%.
And they actually had fallen back pretty significantly from when they initially announced. You know, a lot of AI talk on Microsoft’s side. Google really, I think that the big thing is their continued to improvements rather at ad sales space. And, you know, sure, they’re going to have to talk about AI as well.
But it just still feels really like Microsoft is continuing to dominate this conversation as far as AI goes. And, you know, I just want to go real quick to what we’re seeing from folks on Twitter as far as the AI aspect goes. We asked some of our readers, who is winning the race so far? And 56% so far say Microsoft.
SEANA SMITH: Wow, that’s closer than I thought it was going to be.
DAN HOWLEY: Yeah, Google getting kind of blown away at 34%. And then Baidu and, you know, Baba, Alibaba down at 3.5%. Not sure if anybody is really kind of clocking those as much. But people on Twitter really–
BRAD SMITH: Put some respect on earnings name, Dan.
DAN HOWLEY: I’m sorry, I’m sorry. People on Twitter, they’re kind of saying, look, Google had sales, a measly 3% year over year. Basically saying, look, they the bar was low. They did well, big deal. Others saying that, look, both Microsoft and Google beat on earnings. That’s really good. So the tech story is still alive.
BRAD SMITH: Yeah, absolutely. Just lastly here, Dan, as we’re taking a look at the results of that poll, I’ve got to know who you voted for.
DAN HOWLEY: I think Microsoft right now, man. It’s hard to vote against them. They’re doing pretty good. All right, all right, that’s a take, that’s a take. We’re going to continue to discuss all the things that continue to flow out of not just AI, but the rest of the tech earnings.
There’s much more after the call to roll on. Over the course of this week, we’ve got more of those companies in this beloved tech landscape reporting. But for Brad Smith, for Seana Smith, and for Dan Howley, that does it for us here on the day. You’ve been watching “After the Call” live on Yahoo Finance. And you can catch more of our coverage 9:00 AM Eastern time tomorrow.
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