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Sam Dickie: Fisher Funds expert on Microsoft and Google posting their latest results · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
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  Speaker 2: Two more AI heavyweights reported just a few hours ago,
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  Speaker 2: Microsoft and Google. Both have booming AI data center businesses,
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  Speaker 2: yet Microsoft's shares rose a few percent after the bell,
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  Speaker 2: while Google's were absolutely hammered. Sam Dickey from Fisher Funds
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  Speaker 2: is with us to explain.
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  Speaker 1: Hello, Sam. Good evening, Edith.
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  Speaker 2: Why the opposite verdicts for them?
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  Speaker 1: Yeah, so they both grew like weeds. So Microsoft's data
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  Speaker 1: center business, cloud AI business, Azure grew about 48%. Google
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  Speaker 1: Cloud doubled up 103%. It didn't help that Google's bar
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  Speaker 1: was ridiculously high. Analysts were hoping for 110%, but the
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  Speaker 1: key difference was the core businesses. So Microsoft beat in
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  Speaker 1: its bread and butter office and software business, and Google
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  Speaker 1: missed in its core business. massive search advertising business. So
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  Speaker 1: the market is telling these companies they have to win
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  Speaker 1: at home before they get a blank check to spend away.
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  Speaker 2: So how did Google's advertising business then do versus Meta?
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  Speaker 1: We got the verdict today. So Meta reported a week ago,
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  Speaker 1: Google's ad revenue grew about 11%, Meta's grew 26%. And
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  Speaker 1: a few quarters ago, these companies were sort of neck
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  Speaker 1: and neck. Now Meta is adding about $ 13 billion more
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  Speaker 1: ad revenue a quarter.
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  Speaker 2: Astonishing, really.
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  Speaker 1: And Google's adding about $ 8 billion. And Google's excuses were
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  Speaker 1: a little bit thin. They sort of blamed currency and
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  Speaker 1: tougher comparisons last year and World Cup timing. The fact
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  Speaker 1: is Meta faced the same thing. So Meta's just frankly
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  Speaker 1: doing a better job.
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  Speaker 2: Is AI and the agentic shopping a headwind or do
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  Speaker 2: you think it is a tailwind for search?
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  Speaker 1: Well, this has been the big fear really since sort
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  Speaker 1: of ChatGPT came on the scene in 22, 23, that
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  Speaker 1: Google's massive... commercial search business, of which they have about 95%
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  Speaker 1: market share, would be under pressure from a new way
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  Speaker 1: of searching. I'm sure you hear there and lots of
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  Speaker 1: your listeners don't just Google things the whole time you
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  Speaker 1: search with your chatbots. So it really is an old
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  Speaker 1: fear resurfacing. And this is the paradox that got people
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  Speaker 1: concerned today is search queries are actually growing at their
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  Speaker 1: fastest pace in five years, yet search revenue came in light.
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  Speaker 1: So It really is that AI answers are longer, but
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  Speaker 1: they earn less advertising revenue. And then when we move
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  Speaker 1: on to agentic commerce, which we've been talking about with Muse,
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  Speaker 1: and eventually that'll do it all for us, what we
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  Speaker 1: don't know is where that ad's going to live. And
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  Speaker 1: if it lives within the agent, maybe Google can make
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  Speaker 1: agentic commerce additive. But if the agent is not interested
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  Speaker 1: in the ad and it goes straight past it, maybe
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  Speaker 1: it will sort of cannibalize their business. So that's a
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  Speaker 1: big question the market's grappling with.
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  Speaker 2: And so what does this mean for investors then?
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  Speaker 1: Well, I think the market is always morphing, wasn't it? Originally,
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  Speaker 1: it was just show me any sort of AI revenue,
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  Speaker 1: and then it was show me aggressive AI revenue, and
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  Speaker 1: then it was show me a return on the AI revenue.
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  Speaker 1: And now it's requiring the core business to be still
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  Speaker 1: going very strongly to get a mandate to continue to
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  Speaker 1: invest aggressively in AI. Now, one thing that's really interesting
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  Speaker 1: is that The market is as schizophrenic as it always is.
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  Speaker 1: So you and I talked way back in 24, 25
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  Speaker 1: about how Google was an AI loser, which was, of course,
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  Speaker 1: wrong by the market. It rallied 190% in the market,
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  Speaker 1: literally said it was the only complete AI winner. Again,
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  Speaker 1: too extreme, and now it's a loser again. While Microsoft
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  Speaker 1: was uninvestable six months ago, it was going to get
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  Speaker 1: its lunch cut in its core Microsoft Office business by
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  Speaker 1: Claude and Jack GPT. And look at them now. Google's
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  Speaker 1: down 25% from its highs and Microsoft's up more than 50%.
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  Speaker 1: So the point is the news is really as good
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  Speaker 1: as the market thinks or as bad.
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  Speaker 2: Yeah, interesting. Hey, Sam, thanks very much. Talk to you
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  Speaker 2: in a week's time. Sam Dickey, Fisher Funds.