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Google managed to beat a downturn in the wider tech sector thanks to an increase in demand for its cloud services, as rival Microsoft enjoyed a 7pc boost to revenues.
Alphabet, the search giant's parent company, reported revenues grew to $69.8bn (£56.2bn) in the first three months of 2023, beating analyst expectations, but only improving by 3pc compared to the previous year.
Meanwhile, Microsoft, which is locked in a race with Google to develop a new wave of AI chatbots, revealed a 7pc increase in revenues to $53bn and a boost in profitability.
Profits fell at Alphabet as the tech giant took a $2bn hit on restructuring costs after it laid off a total of 12,000 staff in January, 6pc of its workforce.
The company’s internet services business, its cloud division, recorded a profit for the first time.
Despite besting gloomy market expectations, the quarterly growth figures remained one of Alphabet’s slowest on record amid a slowdown in digital advertising spending. The tech giant also announced a share buyback, worth $70bn, despite mass layoffs across the technology sector.
Its growth rate remained significantly down on the previous year and profits fell. Shares ticked up 3pc in after market trading.
The tech giant has bet its hopes on a new race for artificial intelligence, embedding digital chatbots into its search products.
Sundar Pichai, chief executive of Alphabet, said: “Our long-term investments in deep computer science make us extremely well-positioned as AI reaches an inflection point, and I’m excited by the AI-driven leaps we’re about to unveil in Search and beyond.
The company last week merged its Deepmind and Google Brain AI teams in an effort to counter the emergence of ChatGPT, a new bot developed by start-up OpenAI.
Microsoft, which has signed a multibillion dollar deal with OpenAI to use its technology for internet search, hailed its AI efforts in its earnings.
Satya Nadella, Microsoft chief executive, said: “The world’s most advanced AI models are coming together with the world’s most universal user interface – natural language – to create a new era of computing.”
Microsoft has had its own share of layoffs as tech giants attempt to adjust to a post-pandemic slowdown in the tech economy. Microsoft shares jumped 5pc in after hours trading.