While long-term AI revenue prospects look robust, don’t expect much ROI this year.
A “who’s who” of U.S. technology giants, including Meta, Amazon, Apple, and Microsoft, are reporting quarterly earnings in early February, with artificial intelligence front and center for investors and for tech company finance leaders.
One refrain is common. Big artificial intelligence investments are already in the pipeline, but it’s going to take some time to yield robust revenue results, and there’ll be some short-term budgeting pain in the process.
“We move from talking about AI to applying AI at scale,” Microsoft CEO Satya Nadella said on the company’s earnings call on Tuesday. “By infusing AI across every layer of our tech stack, we are winning new customers and helping drive new benefits and productivity gains.”
Nadella reemphasized Microsoft’s commitment to its burgeoning AI and cloud computing rollouts, which should require some belt-tightening at the company. He pointed to “disciplined cost management across every team” on the call.
Microsoft is also committed to making AI work with few new hires. “We’re repivoting our workforce toward the AI-first work we’re doing without adding a material number of people to the workforce,” said Amy Hoof, CFO at the company. “We’re looking at AI as “the thing that’s going to shape the next decade.”
A “Year of Efficiency”
Meta CEO Mark Zuckerberg issued similar sentiments on his company’s earnings call on February 1.
“2023 was our ‘year of efficiency,’ which focused on making Meta a stronger technology company and improving our business to give us the stability to deliver our ambitious long-term vision for AI and the metaverse,” Zuckerberg noted.
Alphabet CEO Sundar Pichai, CEO, is also on the budget-conscious list this earnings season, calling AI for Search, YouTube, Google Cloud, and expanded data centers as the “key to realizing our big AI ambitions” and citing lower spending for “low priority” projects.
“We continue to invest responsibly in our data centers and compute to support this new wave of growth in AI-powered services for us and for our customers,” Pichai said. “You’ve heard me talk about our efforts to reengineer our cost base durably and to improve our velocity and efficiency. That work continues.”
Bigger AI application spending and lower hiring rates are also on the docket at Alphabet, according to company CFO Ruth Porat. 2024 spending should be “notably larger than 2023” due to ongoing AI investments and cloud computing “capital expenditures,” Porat noted on the Alphabet earnings call.
The tech titans are battening down the hatches and counting on their massive investments in AI to pay off, and they’re willing to pony up the cash to make that happen – even if the profits don’t show up right away.
“We predict that the revenue uplift for enterprise software companies (in addition to the cloud providers of gen AI processing capacity) will be approaching a $10 billion run rate by the end of 2024,” states Deloitte in a recent research note.
“That’s lower than the US$14 trillion (not a typo) that one fund manager has predicted for gen AI software by 2030, but still significant, even though it’s a fraction of the $1.6 trillion in global enterprise IT spending projected for 2024,” Deloitte added. “It’s also smaller than the expected hardware uplift for chips and servers that perform gen AI of more than US$50 billion in 2024..”

Brian O’Connell, a former Wall Street bond trader and best-selling author, is a prominent figure in the finance industry. With a substantial background as an ex-Wall Street trader, he has authored two best-selling books: ‘The 401k Millionaire’ and ‘CNBC’s Creating Wealth’, demonstrating his profound knowledge of finance and investing.
Brian is also a finance and business writer for esteemed national platforms and publications, including CNN, TheStreet.com, CBS News, The Wall Street Journal, U.S. News & World Report, Forbes, and Fox News.