Google Thinks It Can Cash In on Generative AI. Microsoft Already Has

Alphabet CEO Sundar Pichai is confident that Google will find a way to make money selling access to generative AI tools. Microsoft CEO Satya Nadella says his company is already doing it.

Both companies reported better-than-expected quarterly sales and profit on Thursday. And the stock prices of both soared on the results, with Alphabet further buoyed by its new plans to buy back more shares and issue its first-ever dividend.

But the near-term fortunes of Microsoft and Google, at least as far as their generative AI efforts are concerned, look different under the hood and in the comments of their executives. How investors, workers, and potential customers perceive the rivals’ dueling efforts could determine which gets the better chunk of the hundreds of billions of dollars in spending expected to flow to such software in the coming years.

In a call with financial analysts on Thursday, Nadella touted that Microsoft now has 1.8 million customers for GitHub Copilot, a generative AI tool that helps engineers write software code. That’s up from 1.3 million customers a quarter ago.

Among Fortune 500 companies, 60 percent are using Copilot for Microsoft Office 365, a virtual assistant that uses generative AI to help workers write emails and documents, and 65 percent are using a Microsoft Azure Cloud service that enables them to access generative AI software from ChatGPT-maker OpenAI. “Azure has become a port of call for pretty much anybody who is doing an AI project,” Nadella said. The $13 billion dollars Microsoft has invested in OpenAI has certainly helped win those clients.

The buzz of interest in AI services helped drive revenue for Microsoft’s biggest unit–cloud services–up by seven percentage points compared to a year ago, and Microsoft’s overall sales rose 17 percent to nearly $62 billion. It also gained cloud market share, Nadella added. The number of $100 million cloud deals that Microsoft landed increased 80 percent during the quarter compared to the same period a year ago and $10-million deals doubled.

Alphabet’s Pichai’s had milestones to boast about too. He told analysts in a separate call that more than 1 million developers are using Google Cloud’s