AI Briefing: Big Tech puts AI at the center of another earnings season

Just like with other recent financial quarters, AI is coming up plenty in corporate filings and and earnings calls with investors.

Last week, the major tech giants showed renewed strength, as companies credited AI as a key growth driver. Google, Meta, Amazon and Microsoft all mentioned AI — generative AI and otherwise — dozens of times while touting new AI tools and the customers using them.

“Google Cloud benefits from thousands of product advancements,” analysts with William Blair wrote in a research note about Alphabet’s results. “Within the segment, Google’s product and generative AI capabilities allowed it to both win and expand relationships with a variety of large brands.”

Major companies that discussed generative AI in last week’s financial filings include Qualcomm, Coursera, Appfolio and MatchGroup. (IBM, which reported strong results last month, recently helped The Recording Academy make a new generative AI tool for the 2024 Grammys.) More tech and advertising firms — including Snap, Omnicom and IPG — are all scheduled to report their quarter this week and will also likely talk about their own AI strategies. However, despite all the promises for businesses, there were few mentions of AI’s myriad risks.

Meta’s Catch-22 moment

On Meta’s Q4 call with investors, AI came up nearly as many times as it did on Alphabet’s. Founder and CEO Mark Zuckerberg mentioned “fully rolling out” the new Meta AI assistant and other AI chat features to U.S. users and early testing for more than 20 other generative AI features across Facebook, Instagram, Messenger and WhatsApp. He also said Meta’s focus areas for 2024 include working toward launching its Llama 3 model, making Meta AI assistant more useful, and expanding its AI Studio that lets developers build custom chatbots. 

In addition to touting hardware like the Ray-Ban Meta smart glasses — which include Meta AI — and the Quest 3 headset, Zuckerberg also mentioned efforts to work on general intelligence research and major investments for additional computing power. Meta execs also noted advertisers have been testing new generative AI tools for selecting audiences, generating text variations and optimizing images.

“One thing that became clearer to me in the last year is that this next generation of services requires building full general intelligence,” Zuckerberg told investors. “Previously I thought that, because many of the tools were social, commerce, or maybe media-oriented, that it might be possible to deliver these products by solving only a subset of AI’s challenges.”

While increased teenage users has been a sign of a platform’s staying power, increased concerns about the harms of social media could be a double-edged sword. A day before Meta’s earnings were released, Zuckerberg and other tech CEOs appeared in front of the Senate Judiciary Committee for hours of questions about their companies’ potential harms to kids. Social platforms’ popularity with younger users is now “both a liability and a strength,” Insider Intelligence analyst Jasmine Enberg noted after the hearing.

“With AI exacerbating the spread and scale of harmful content on social platforms, a pullback in some platform protections, and a shift in young user engagement to more private spaces that are harder to moderate, teens now also represent one of social media’s biggest challenges,” Enberg wrote. “So much so that several social executives, including TikTok CEO Shou Zi Chew, argued in the hearing that their core audience is comprised of adults.”

Alphabet and the ABCs of AI 

In Q4 2023, Google Search revenue increased 12.7% to $48 billion while YouTube ad revenue increased 15%. On the company’s earnings call with investors, AI was mentioned at least sixty times on Alphabet’s earnings call with investors while related references like “generative” and “Gemini” added dozens more. 

Execs mentioned how AI is changing search with new features like Circle To Search, generative overviews for Google Lens and experiments with generative search (SGE). Other features mentioned include AI-generated search campaigns, ads within SGE, generative AI features for YouTube creators and various AI tools for the Pixel 8 phone. Google execs also mentioned some new customers using new AI features in Google Cloud and other platforms, including McDonald’s, Motorola, Verizon, Eli Lilly, Novartis, Deutsch Telecom, Uber, Wayfair, GE and Spotify.

“I think AI gives us opportunity both on the organic side as well as on the monetization side, and I think we are in the early days of it,” said Google CEO Sundar Pichai. “I think we will be able to, taking a long-term view, serve information needs in a deeper way. And so I think about it with that long-term context, and I’m pretty excited about what’s ahead.”

Generative AI beyond ads

On Microsoft’s Q2 2024 earnings call, the company talked less about advertising but plenty about AI’s impact elsewhere. AI-generated images and chats both doubled quarter-over-quarter, said CEO Satya Nadella, who also noted both reached the 5 billion mark in January.

Microsoft reported an 8% increase in search and news advertising revenue, which CEO Satya Nadella said was driven by increased search volumes but offset by a “negative impact from a third-party partnership.” Despite device revenue declining 9%, Microsoft is aiming to make AI “a first-class part of every PC,” following the debut of numerous AI PCs running Windows that debuted at CES last month.

Various customers that have deployed Microsoft Copilot include Dentsu, Honda and Pfizer, according to Nadella, who also mentioned customers like Bayer, Air India and Siemens have built plug-ins to extend Copilot’s abilities. Microsoft also said it now has 53,000 customers using Azure AI, with a third of those being new in the past year. Nadella said more than half of Fortune 500 companies are now using Azure OpenAI including Ally Financial, Walmart, Coca-Cola and Vodafone.

Another big AI player, Amazon, mentioned building dozens of generative AI apps across the company. Before reporting its quarterly results, the it announced a new AI shopping assistant called Rufus that can help answer customer questions about products or other topics. Other recent AI debuts from Amazon include Q, an AI assistant for enterprise customers. Amazon also mentioned customer using its AI chips including Anthropic, Qualtrics and Snap.

“If you look at the genAI revenue we have, in absolute numbers, it’s a pretty big number,” Amazon CEO Andy Jassy said on the company’s investor call. “But in the scheme of a $100 billion annual revenue run rate business, it’s still relatively small, much smaller than what it will be in the future, where we really believe we’re going to drive tens of billions of dollars of revenue over the next several years. But it’s encouraging how fast it’s growing, and our offering is really resonating with customers.”

Amazon is still “relatively quiet” about its advertising business, said Gartner analyst Mike Froggatt. However, he noted company is quickly catching up to Meta and Google in terms of revenue while building out an “ecosystem play” for ads, media and tech.

“They’re not chasing advertising dollars, they’re chasing deep partnerships with brands that span supply, sales, technology services, and yes, ad & marketing,” Froggatt told Digiday. “That potential pie is much bigger than advertising alone, and when you dig into their investments across AI, it begins to paint that picture. They want to be an enabler, create the ecosystem for builders with tools and services that will become intrinsic to their offerings.”

Prompts and Products: AI News and announcements

  • A bipartisan group of senators introduced a new bill that would criminalize nonconsensual AI-generated images.
  • Advertising holding companies are taking differing approaches to rolling out generative AI platforms.
  • The Browser Company announced a new ad-free app that offers AI tools for browsing and search.
  • The European Council approved text for the AI Act, moving the EU’s sweeping AI legislation closer to being finalized. 
  • Italy’s data protection agency said OpenAI’s ChatGPT violates GDPR privacy laws. Without providing details, the Garante said an investigation found evidence pointing “to the existence of breaches of the provisions contained in the EU GDPR.” OpenAI now has 30 days to respond to the agency.
  • The AI startup Latimer launched its new platform that aims to reduce biases of generative AI.
  • Google launched new generative AI tools for images and music called ImageFX and MusicFX.

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