AI Competitiveness Divides Performance: Alphabet Smiles, Intel Cries

Source

Korea Economic Daily

Summary

Alphabet reported that its first-quarter performance exceeded market expectations due to an increase in paid subscribers driven by enhanced AI capabilities.
Intel experienced poor first-quarter performance due to a lack of AI competitiveness, resulting in a decline in revenue and an operating loss.
Alphabet's stock price rose by 1.68%, while Intel's stock price fell by 6.7%.

Google Paid Subscribers Reach 270 Million

AI Overview Usage Surges

Alphabet Revenue Increases by 12%

AI Chip 'Gaudi' Loses Ground

Intel Reports Q1 Operating Loss

Alphabet, Google's parent company, reported first-quarter (January to March) results that exceeded market expectations. The increase in paid subscribers due to enhanced artificial intelligence (AI) capabilities is credited with driving the strong performance. In contrast, Intel failed to avoid poor performance as it lagged in the AI competition.

On the 24th, Alphabet announced that its first-quarter revenue was $90.13 billion, with earnings per share (EPS) of $2.81. This exceeded Wall Street expectations compiled by market research firm LSEG (revenue of $89.12 billion, EPS of $2.01). Revenue increased by 12% year-on-year, surpassing the market forecast of 10%.

On the same day, Sundar Pichai, CEO of Alphabet, stated, "Strong growth in the search sector continued thanks to the integration with AI capabilities." Google's paid subscribers exceeded 270 million. The monthly active users (MAU) of the AI tool 'AI Overview', which appears at the top of search results, surpassed 1.5 billion. This is an increase of about 500 million in six months since reaching 1 billion in October last year. Along with its performance, Alphabet also announced a $70 billion share buyback plan. Based on strong operating profits, Alphabet is also increasing investments to strengthen AI leadership. Alphabet's first-quarter capital expenditure was $17.2 billion, slightly exceeding the expected $17.1 billion.

Intel, on the same day, reported poor performance in its first-quarter results. Revenue fell by 11.2% from the previous quarter, and operating profit turned to a loss. Intel's second-quarter revenue guidance is $11.2 billion to $12.4 billion. This is not only lower than the first quarter but also below the market forecast of $12.9 billion.

Experts pointed to a lack of AI competitiveness as the cause of Intel's deteriorating performance. Intel's AI chip 'Gaudi' has failed to secure a proper foothold in the market, being overshadowed by Nvidia. Last year, Intel incurred a large deficit in its foundry (semiconductor contract manufacturing) business, leading to a restructuring affecting 15,000 employees. On the 25th, Alphabet's stock price rose by 1.68%, while Intel's stock price plummeted by 6.7%.

Reporter Dayeon Lim allopen@hankyung.com