Shares of Microsoft rose 8.5% in after hours trading after the tech giant reported better-than-expected financial results for the March quarter on Tuesday. Revenue rose 7% to $52.9 billion across the board, but the company’s AI-powered online search business grew faster.
Microsoft reported that its search and ad business revenue climbed 10% during the three months to March 31, thanks to its success in rolling out ChatGPT-powered advances in its Bing search engine. By comparison, Google search rose only 2% during the same quarter.
Microsoft stock gained after the news, rising more than 8.3% to $298.28 as of writing. The gain lifted Microsoft’s total market capitalization by over $172 billion to $2.22 trillion, making it the second most valuable company in the world, according to Companies MarketCap.
Per the data, Microsoft’s market value is around $870 billion more than that of Alphabet, the parent company of Google. Over the past 52 weeks, shares of Microsoft have reached a high of $299.10 and a low of $213.43, according to Yahoo Finance.
Microsoft pins hope on AI
For the review quarter, Microsoft’s $52.9 billion in revenue and $2.45 earnings per share beat analyst forecasts of $51 billion and $2.24 per share, FactSet data shows. The revenue increase was better than the previous quarter’s 2% year-over-year rise.
The results show the early impact of Microsoft’s much-hyped pivot to artificial intelligence in the first quarter of 2023, when it integrated ChatGPT into its Bing search engine. In January, Microsoft invested a reported $13 billion into OpenAI, creator of popular chatbot ChatGPT.
In a statement, CEO Satya Nadella said that Bing now boasts more than 100 million daily active users, and revenue from gaming subscriptions approached $1 billion.
Bank of America cited data from Sensor Tower showing that Bing traffic surged 16% in the six weeks since Microsoft announced plans to integrate ChatGPT into search. The American tech company is also tapping AI for its Microsoft 365 productivity software.
“As with any significant platform shift, it starts with innovation, and we’re excited about the early feedback and demand signals from the AI capabilities we’ve announced to date,” said Microsoft CTO Amy Hood, as reported by CNBC.
“We will continue to invest in our cloud infrastructure, particularly AI-related spend, as we scale to the growing demand driven by customer transformation. And we expect the resulting revenue to grow over time. “
Google falls short
Alphabet, Google’s parent company, also released its first quarter results on Tuesday, which underperformed Microsoft’s. Alphabet reported that revenue rose just 3% to $69.8 billion and profit came in at $15,1 billion, both beating analyst estimates.
But advertising revenue, the company’s cash-cow, declined. Google posted $40.4 billion in advertising revenue last quarter, falling around 5% from $42.6 billion reported during the previous three months.
Google is also looking to artificial intelligence, but the launch of its search chatbot Bard earlier this year failed to impress. The company says it is fine tuning the product to make it more user friendly while addressing issues of the bot spitting out false or untruthful responses.
At the time of press, Alphabet stock is down 0.34% at $104.26.