Microsoft and Alphabet, Google’s parent, reported greater resilience than expected in their core businesses in the second quarter, helping to underpin Big Tech’s recent stock price gains as both companies cautioned about higher AI spending ahead.

The recovery in Google’s digital advertising operations, along with a solid performance in Microsoft’s cloud business at a time when many customers are looking to streamline spending because of economic uncertainty, lifted the companies’ revenue above Wall Street’s expectations. A rare round of job cuts that swept through the biggest tech companies early this year also boosted profit margins.

The news lifted Google’s shares by 6 per cent in after-market trading, taking their gain this year to 46 per cent. Microsoft’s stock, which had risen a similar amount as Big Tech’s share price surge accounted for most of Wall Street’s advance this year, fell back nearly 4 per cent on profit-taking.