Microsoft’s quarterly report showed strong artificial intelligence advancements and a perceived lead against Alphabet, Google’s parent company. After integrating ChatGPT and investing $10 billion into OpenAI, Microsoft is now focusing on search, Google’s long-owned turf. Microsoft’s search revenue grew 10%, citing share gains for Bing and its Edge browser. Bing now has over 100 million daily active users, and daily installs of the Bing mobile app have grown four times since the launch of the AI-powered version two months ago.
On the other hand, Google called its search revenue “resilient,” seeing only 2% growth in the category. While Google CEO Sundar Pichai noted that they have been using AI for a while, Guggenheim analyst John DiFucci pointed out Bing’s growth as noteworthy. Bing’s growth in the quarter reversed a five-quarter downward trend.
Microsoft’s position in AI has pushed DiFucci’s price target on Microsoft up to $232 from $212. Microsoft believes that its ability to tie new technology to its Azure platform could be crucial. Microsoft now has 10 times more Azure OpenAI service customers than last quarter, with more than 2,500 Azure OpenAI service customers. Azure and other cloud services revenue grew 27% in the third quarter compared to the same period a year prior.
In summary, Microsoft’s push into AI-powered search has put it in a strong position against Google, with Bing’s growth reversing a downward trend. Microsoft’s AI infrastructure, powered by Nvidia and sitting on Azure, has provided the company with a big initial advantage in this next war. For investors, Microsoft’s position in AI, cloud services, and potential growth in search make it a worthwhile investment.
