Microsoft and Alphabet prove the AI boom has more room to run

• Microsoft and Alphabet reported quarterly earnings that beat Wall Street's expectations.

• Their CEOs said that their profits are in part thanks to their companies' investments in AI.

• This is going to be "a goldmine situation for them," Wedbush's Dan Ives told CNBC.

Investors just got a sneak peek at what the fruits of massive AI investments could look like.

On Thursday, just off the heels of Meta's mixed first-quarter results that caused a dip on Wall Street, Microsoft and Alphabet just proved that there's money to be made off of artificial intelligence.

Microsoft reported $21.9 billion in profits for its quarter ending on March 31, a 20% increase from the last fiscal year of the same period. Google's parent company reported $23.7 billion in profits, a 57% increase from the last fiscal year period.

Both profit results beat analysts' expectations, and the companies' leaders say they have AI to thank for that.

During an earnings call on Thursday, Alphabet CEO Sundar Pichai acknowledged that a large part of its first-quarter performance is due to Google's search engine. However, the executive also made sure to highlight the contributions of Google Cloud, which now comes with generative AI services through Google's AI model, Gemini.

"In Cloud, we have announced more than 1,000 new products and features over the past 8 months. At Google Cloud Next, more than 300 customers and partners spoke about their generative AI successes with Google Cloud, including global brands like Bayer, Cintas, Mercedes Benz, Walmart, and many more," Pichai told investors in the call.

Ruth Porat, Alphabet's chief financial officer, said in the call that Google's cloud segment saw $9.6 billion in revenue, and part of that is a reflection of "an increasing contribution from AI."

Similarly, Microsoft said its latest quarter received a boost from its cloud services.

According to a company press release, Microsoft reeled in $26.7 billion in revenue from its cloud products, including Azure. The company said that 7% of its growth from Azure came from AI.

Microsoft CEO Satya Nadella's sole statement in the press release highlights the company's investment in artificial intelligence, namely Microsoft Copilot, which is an AI assistant for Azure.

"Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry," Nadella said in the press release.

Investors appeared pleased with Microsoft's and Alphabet's quarterly performance, which gave the companies a stock surge, as Wall Street continues to nurse a hangover from Meta's first-quarter report.

Wedbush analyst Dan Ives told CNBC on Thursday that the reaction is a "stark change" from what Wall Street saw 24 hours ago with Meta.

"They have a goldmine of AI engineers and data, and now they're starting to monetize it," Ives said of Alphabet and Microsoft. It's a "goldmine situation for them on AI," he added.

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