Is AI profitable yet?

Hi, it’s Jackie in Washington. Investors want to know more about how AI is impacting financial results. But first...Three things you need to [View in browser]( [Bloomberg]( [by Jackie Davalos]( Hi, it’s Jackie in Washington. Investors want to know more about how AI is impacting financial results. But first... Three things you need to know today: • Salesforce will cut [about 700 workers]( • BlackBerry’s stock [hit a 20-year low]( • US spies want to [use AI]( Generative profits Big technology companies have spent the last year shouting about how new forms of artificial intelligence will transform their businesses. Billions of dollars in investments, numerous chatbots and promises to embed generative AI into products have captivated investors and driven some tech stocks to record highs. But a year into the AI boom, tech companies have yet to show how the hype translates into profits. That uncertainty will come into focus this week. Microsoft Corp. and Alphabet Inc., the two biggest AI stocks, each report earnings on Tuesday. “There’s a lot of pressure for Microsoft and Alphabet to show tangible evidence that their AI bets are paying off,” said Daniel Morgan, senior portfolio manager at Synovus Trust Co. The current AI storm looks a bit like when cloud computing started taking off. After much prodding from investors, companies such as Amazon, Microsoft and Oracle eventually disclosed cloud sales, Morgan said. “Analysts will want to see some sort of clear number that we can use to grade the stock at the end of the quarter,” he said. Unlike Nvidia Corp., which can trace its AI fortunes to the chipmaker’s blockbuster H100 product, Alphabet and Microsoft don’t neatly break out AI-driven sales because AI is woven throughout their businesses. For Alphabet’s Google, some proof of AI’s boost can be seen in its cloud computing division, which reported a profit for the first time last year on the back of more business from AI startups. Microsoft is more specific and sometimes discloses the growth in its cloud product, Azure, that comes from generative AI. Still, companies will be on the hook to say more to justify the billions they’ve already spent on AI, Morgan said. Microsoft is better prepared for its show-me-the-money moment. After its $10 billion [commitment]( to OpenAI a year ago, Microsoft immediately began overhauling its product line with tools powered by the startup’s large language model. In September it [unveiled]( an AI-powered assistant, Copilot, for Windows and Office apps that it [sells]( to consumers and businesses for a subscription fee. Financial results for Microsoft could offer the first glimpse at how much traction its AI-powered tools are having since their release. “People want to get a sense as to what the initial adoption curve of Copilot is looking like,” said Derrick Wood, an analyst at Cowen & Co. Microsoft’s plan to monetize AI helped [push its market capitalization]( past the $3 trillion mark this month. Google has been trying to catch up. It came out with a chatbot; [poured]( $2 billion into Anthropic Pbc, an OpenAI rival; started testing generative AI results in search; and last month released its most powerful large language model, Gemini. Now the company must figure out a way to demonstrate how these initiatives are bearing fruit. A Bloomberg Intelligence analysis showed Gemini alone could generate about $1 billion in revenue from licensing. Regardless of how long it takes for AI to impact earnings, tech companies have another financial tool at their disposal that they’re increasingly willing to use: layoffs. —[Jackie Davalos](mailto:jdavalos10@bloomberg.net) The big story Deepfakes of Taylor Swift cascaded across social media, enraging her fans. Now that AI has made [creating lifelike images accessible](, being able to distinguish what is real and what isn’t in the digital world is a challenge. One to watch [Watch the Bloomberg Technology TV analysis]( of the FTC’s AI inquiry. Get fully charged A cyberattack on Swedish government computers may leave [systems inoperable for weeks](. OpenAI’s Sam Altman is visiting semiconductor industry leaders in South Korea as he weighs a [move into chip production](. Britain’s antitrust watchdog will investigate Vodafone’s deal with Three, which would create the [UK’s largest mobile operator by revenue](. 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