Cloud computing continues to drive revenue growth for Microsoft and Alphabet in latest earnings reports.

Microsoft’s cloud business played a significant role in driving overall growth for the tech giant in the latest quarter, as an increasing number of customers utilized the company’s cloud services for their AI-powered platforms and tools.

Microsoft’s cloud revenue in the first fiscal quarter was $38.9 billion, marking a 22% year-over-year increase.

A substantial portion of this growth was attributed to Microsoft Azure, the company’s public cloud computing platform, which experienced a 33% revenue growth. In addition, revenue from Microsoft 365 Commercial products and cloud services rose by 13%, or 14% in constant currency terms.

Overall, Microsoft reported revenue of $65.6 billion for the quarter ending on Sept. 30, representing a 16% increase, approximately $1 billion more than analysts had anticipated.

Microsoft CEO Satya Nadella stated, “AI-driven transformation is reshaping work, work artifacts, and workflow across all roles, functions, and business processes. We are expanding our opportunities and acquiring new customers by assisting them in applying our AI platforms and tools to drive growth and operational efficiency.”

Following the earnings report, Microsoft’s shares climbed just under 1% to $436 in after-hours trading on Wednesday. However, a lower-than-expected outlook for Azure growth in the current quarter—projected at 31% to 32% compared to 33% in the previous quarter—led to a 4% decline in the company’s stock price.

Recently, Google’s cloud business also contributed significantly to parent company Alphabet’s double-digit revenue growth, with CEO Sundar Pichai attributing the success to substantial investments in AI. The company’s cloud revenue for the quarter reached $11.3 billion, a 34% increase.

During discussions with analysts, Pichai highlighted the growing number of individuals and businesses utilizing Google’s AI, powered by its Gemini large language models, across various tools.

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Encouraged by the positive cloud results, investors drove Alphabet’s shares up nearly 3% in regular trading on Wednesday, reaching $176.14.

Microsoft, Google, and Amazon are engaged in a fierce competition for cloud dominance, as the potential of generative AI to drive growth in cloud services became evident. Developers are increasingly looking to build and expand the use of generative AI chatbots and other applications in the cloud.

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