Microsoft Corporation

🇺🇸NASDAQ Global Select
Back to all articles
Microsoft Corporation stock analysis MSFT overview
Somewhat Bearish -30

Forget MSFT: Google Search Revenue is Up 19% Despite ‘Nearly Monopoly-Like Market Share’

📈 Alphabet reported Q1 2026 revenue of $109.896 billion, marking a 22% year-over-year increase.

💰 Net profit surged by 81% to reach $30.73 billion for the quarter.

🔍 Google Search & Other revenue jumped 19% to $60.399 billion despite high market share concerns.

🤖 CEO Sundar Pichai highlighted that AI is "lighting up every part of this business" with query volumes at record highs.

☁️ Google Cloud revenue exploded by 63%, while project backlog more than doubled to $460 billion.

🧠 Alphabet invested approximately $185 billion in AI infrastructure, significantly expanding its in-house chip capabilities.

🤝 The company maintains a 14% stake in Anthropic and has supported its valuation growth toward $900 billion.

📈 Alphabet shares climbed 119.25% over the past year and continued rising after earnings release.

💻 Microsoft reported an AI business run rate of $37 billion, representing a 123% increase from the prior year.

📉 Azure cloud growth slowed to 39%, leading to investor disappointment despite beating EPS estimates.

🎨 Analysts compared Copilot's market reception to a "PT Cruiser," noting low adoption among corporate users.

💸 Only 3% of Microsoft's corporate clients currently pay for Copilot, marking its worst quarter since 2008.

⚠️ OpenAI and Anthropic are developing tools that threaten the core value proposition of Microsoft Office.

📉 Microsoft stock fell 5.54% to $400.94, putting it down 12.03% for the year-to-date period.

🥊 Alphabet is gaining AI users organically and leveraging stakes in startups like Anthropic simultaneously.

Bullish Signals
  • Alphabet posted Q1 2026 revenue of $109.896 billion, a strong 22% year-over-year increase.
  • Google profit surged 81%, demonstrating exceptional profitability and operational leverage.
  • Google Search revenue grew 19% to $60.399 billion, validating the company's growth despite near-monopoly market share concerns.
  • Google Cloud revenue exploded by 63% year-over-year with backlog doubling from $240 billion to $460 billion.
  • AI queries hit all-time highs under CEO Sundar Pichai's leadership, with Gemini now processing more than 16 billion tokens per minute via direct API use.
  • Shares of Alphabet rose 6% after hours and are up 119.25% over the past year, trading at $377.11.
  • Alphabet expects to spend around $185 billion this year on AI infrastructure, leveraging its own Tensor Processing Units to compete with NVIDIA.
  • The company holds a 14% stake in Anthropic, which is seeking a massive $900 billion valuation, positioning Alphabet as a beneficiary of the broader AI ecosystem.
Risk Factors
  • Microsoft's Azure cloud growth of 39% disappointed investors, marking a significant underperformance compared to Alphabet.
  • Only 3% of Microsoft's corporate users are currently paying for Copilot, indicating weak adoption and monetization of their flagship AI product.
  • Microsoft characterized the quarter as its worst since 2008, signaling severe strategic concerns regarding their AI strategy.
  • The article describes Copilot as "the PT Cruiser of AI," suggesting the product is ubiquitous yet unloved by customers who feel pushed onto it.
  • OpenAI and Anthropic are releasing software tools that allow companies to create their own Excel and PowerPoint, directly threatening Microsoft's core Office software moat.
  • Microsoft fell 5.54% on Thursday to $400.94, extending its year-to-date decline to 12.03%.
  • Unlike Alphabet, which has a strong in-house AI team and organic growth, Microsoft is perceived to have "nothing much to show" to investors except Copilot.
  • Microsoft appears overly reliant on OpenAI, betting all its eggs on that partnership while lacking independent proprietary AI strengths compared to competitors.
Full Analysis
Alphabet (GOOGL) reported a robust Q1 2026 fiscal performance that challenged prevailing concerns about the sustainability of its search business, posting revenue of $109.896 billion, up 22% year-over-year, with profits surging 81%. The headline driver was Google Search & Other revenue, which grew by 19% to $60.399 billion despite holding a "nearly monopoly-like market share." CEO Sundar Pichai attributed this growth to artificial intelligence lighting up every part of the business, highlighting record query volumes and Gemini processing more than 16 billion tokens per minute via direct API usage. This strong performance directly countered the two-year investor thesis that ChatGPT would kill Google Search, as search queries hit all-time highs even in a saturated market environment. Simultaneously, Alphabet's cloud division delivered exceptional expansion with revenue jumping 63% to $460 billion in backlog, more than doubling from the prior quarter's $240 billion. The company plans to invest approximately $185 billion this year in AI infrastructure, significantly utilizing its own Tensor Processing Units to compete with NVIDIA. Alphabet also maintains a strategic 14% stake in Anthropic, which is seeking a valuation of around $900 billion. Market reaction was overwhelmingly positive, with shares rising after hours and trading at $377.11 on Thursday, representing a year-to-date gain of 119.25%. In contrast, Microsoft (MSFT) faced investor disappointment despite technically meeting earnings expectations with EPS of $4.27, which beat estimates by 4.9%. While CEO Nadella cited an AI business at a $37 billion annual run rate up 123%, the market was less pleased with Azure cloud growth of only 39% and significant concerns regarding its Copilot product adoption. Only 3% of Microsoft's corporate users are currently paying for Copilot, leading to criticism that the feature is "everywhere" despite low utilization, marking the company's worst quarter since 2008. Additionally, emerging tools from OpenAI and Anthropic threaten to allow companies to build their own productivity suites like Excel and PowerPoint, potentially eroding Microsoft's traditional Office moat. Consequently, Microsoft shares fell 5.54% to $400.94 Thursday, leaving the stock down 12.03% year-to-date as investors reassess its AI strategy versus Alphabet's more organic growth trajectory.