Amazon and Alphabet’s quarterly earnings this week showcased how to balance massive AI investments with delivering impressive financial results.
On Tuesday, Alphabet reported profits and sales that surpassed analysts’ expectations, with profit growth at 37% and sales up 15% year-over-year. This success, driven by a strong performance in its cloud business, eased investor worries over the company’s sizable AI spending.
Amazon followed with a blockbuster report, announcing earnings per share of $1.43 on revenue of $158.9 billion, beating expectations of $1.16 per share and $157.29 billion in revenue. CEO Andy Jassy reassured investors, stating that as the generative AI market matures, margins will be “very healthy.” Amazon revealed plans to spend $75 billion in 2024 and even more in 2025 on infrastructure.
Although exact figures for Amazon’s AI sales remain undisclosed, Jassy noted that the AI division within Amazon Web Services is generating billions, with growth in the “triple-digit” percentage range year-over-year.
However, Microsoft and Meta weren’t as fortunate. Despite both companies beating expectations, their announcements of continued capital expenditure increases unsettled investors. Microsoft’s slower cloud growth outlook and Meta’s significant capex plans for 2024 reignited concerns, reminding Wall Street of Meta’s past spending on Reality Labs.
Ultimately, tech giants are betting big on AI, and leaders like Jassy and Alphabet’s Sundar Pichai argue that the risk of under-investing in AI far outweighs the cost of over-investing.