Tech Titans Rebound From Tough Times as AI Fuels Optimism

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The tech giants are shaking off the postpandemic blues. Microsoft, Amazon.com, Meta Platforms and Google parent Alphabet last week delivered quarterly reports showing strong growth and improving margins in areas from digital advertising to e-commerce to cloud computing. They are also starting to see some initial payoff from big investments in artificial intelligence, while trying to assure Wall Street that more wins are ahead.

Average revenue for those four companies last quarter rose by about 13% from a year earlier, the fastest rate since the final quarter of 2021. The technology industry is taking off again after grappling with a slowdown for close to two years, in which it reduced staff and cut other costs after a pandemic growth spurt. The early earnings results show the postpandemic hangover may have run its course.

Discussion of AI dominated earnings calls, offering hints about who is ahead in the race to turn the hot technology into hit products. Microsoft said 3 percentage points of the growth in its cloud-computing revenue came from customers paying to use its cloud to offer generative AI products such as ChatGPT. Amazon said it expects tens of billions of dollars in revenue from generative AI in the next several years.

Alphabet and Meta posted robust advertising growth and pointed to their own AI plans. The stock market’s reaction was mixed. Investors are still trying to figure out which companies will turn the promise of AI into long-term profits, said Woody Marshall, a partner at investment firm TCV.

“It’s like a hockey game where the puck is loose in the middle and nobody knows where it’s going," he said. It is a big shift from less than a year ago. Earlier this year, Meta Chief Executive Mark Zuckerberg