AI Earnings Need to Be Disclosed by Google and Microsoft

Over the past year, major tech companies, including Microsoft and Alphabet, have heavily promoted the transformative potential of artificial intelligence (AI). Despite substantial investments and promises, the industry has yet to demonstrate how the AI hype translates into profits. This week, Microsoft and Alphabet, the two leading AI stocks, will report earnings, facing pressure to show tangible evidence of the success of their AI initiatives. Analysts seek clear numbers to evaluate the impact of AI on their businesses, akin to the disclosure of cloud sales during the cloud computing boom. While Nvidia can attribute its AI success to specific products, Alphabet and Microsoft embed AI throughout their operations, making it challenging to break out AI-driven sales. Microsoft, with its commitment to OpenAI, has integrated AI tools into its product line, including the AI-powered assistant Copilot. Investors are eager to see the financial results, especially the adoption curve of Copilot. Google, playing catch-up, has invested in AI-related initiatives, such as Anthropic Pbc, a chatbot, and generative AI in search. Despite uncertainty about AI’s immediate impact on earnings, tech companies may resort to layoffs as a financial tool.