As excited as Microsoft is about AI — and executives mentioned it dozens of times during Tuesday's conference call — it was the basics of corporate computing that drove the company's better-than-expected quarterly numbers.

Why it matters: Microsoft's long-term prospects could well be determined by the company's performance in the AI race — but the ups and downs of corporate tech spending are likely to be the key economic factor shaping its shorter-term destiny.

Driving the news: Microsoft topped expectations for both quarterly revenue and earnings on Tuesday, amid continued cloud computing growth and a PC market, that while sluggish, wasn't quite as bad as anticipated.

• Microsoft Cloud revenue was $28.5 billion, up 22%.
• PC-related businesses took a big hit, however, with Windows revenue from computer makers down 28% and revenue from the devices business that includes Surface down 30%.

Between the lines: While not the driver of the current business, AI was the watchword from both CEO Satya Nadella and chief financial officer Amy Hood, who used the term repeatedly as they discussed each of Microsoft's businesses, from Azure to Teams to LinkedIn.

• The company did say that AI will account for about 1 percentage point of Microsoft's projected 26%–27% growth in Azure this quarter.
• Hood and Nadella also confirmed Microsoft expects to be able to charge for the AI-assisted copilots it is adding to various applications, including Office programs like Word, Excel and PowerPoint.

While Microsoft hasn't announced pricing, the executives pointed to GitHub Copilot as a reference for what it might be able to charge. The list price for GitHub Copilot is $10 per month for individuals and $19 per month for business employees.

• On the cost side, Microsoft did say capital expenses will grow as the company adds infrastructure to deliver new AI services for itself and customers, including OpenAI.

The big picture: Everyone is talking AI, not just Microsoft. Mentions of the technology in earnings calls have surged this year.

Google parent company Alphabet, which also announced earnings Tuesday, beat the AI drum on its investor call as well.

• CEO Sundar Pichai touted the company's Bard and PALM projects while promising a "thoughtful and deliberate" approach to deploying the new technologies.
• Google has reportedly faced internal criticism for allegedly rushing Bard to market despite internal reports suggesting it was not yet ready for release.
• The company's overall performance beat analyst's expectations, with continued growth in Google Cloud revenue, but a small drop in its total ad revenue — the second quarter in a row of decline.

OpenAI is offering a new option for ChatGPT users who want to ensure their data isn't being used to train the company's algorithms.

Why it matters: Privacy is a key concern with AI, and one big early worry in the generative AI boom has been that data users give to AI engines can then be used to train those same engines, potentially exposing sensitive information.

Details: A new mode, added Tuesday to ChatGPT, acts sort of like incognito mode in a web browser.

• When the new "chat history and settings" option is turned off, queries and response won't be saved in one's chat history nor will any information entered be used to train the engine.
• ChatGPT will also make it easier to export data and understand which types of data OpenAI is storing. The new export option will email users a file that includes one's conversations and other data.

Yes, but: While it won't be used to train the engine, OpenAI will still keep data from the more private queries for up to 30 days so it has access to investigate cases of system misuse.

OpenAI is also announcing ChatGPT Business, a paid subscription service due for release later this year.

• Among its features will be that, by default, business users' data won't be used to train the algorithm. OpenAI did not describe other features of the service or its price.

Senior U.S. officials disclosed Tuesday that a little-known partnership between the country's military cyber forces and homeland defenders has stymied the impact of two state-linked attacks, Axios' Sam Sabin reports.

Why it matters: With so many cyber-related agencies in the U.S., it's often difficult for anyone outside of the government to understand which office is responsible for what during an attack.

• These disclosures are some of the first clear examples of how the Pentagon-based Cyber Command and the Department of Homeland Security's Cybersecurity and Infrastructure Security Agency (CISA) cooperate during an active event.

Driving the news: Eric Goldstein, CISA's executive assistant director for cybersecurity, and Maj. Gen. William Hartman, chief of the command's Cyber National Mission Force (CNMF), detailed two previously unknown incidents involving the agencies during a panel talk Monday.

Details: During the 2020 presidential election, CNMF discovered Iranian-linked hacking group Pioneer Kitten lurking on a city's infrastructure "used to report the results of voting," Hartman said. CNMF looped in CISA, which contacted the jurisdiction — resulting in an immediate remediation of the threat, the officials said.

• In another incident, CISA identified three federal agencies facing an "intrusion campaign from foreign-based cybercriminals," Goldstein said. CISA handed this information over to the command, which weighed how it could thwart the malicious hackers. The officials did not name the affected agencies.

Between the lines: CISA and Cyber Command have unique roles in these incidents.

• CISA acts as the liaison between private and public sector organizations about what sectors are impacted in an ongoing incident and what threats everyone should track.
• Meanwhile, Cyber Command has the power to shut down the online infrastructure a malicious actor uses.

Yes, but: Much of this partnership still relies heavily on input from private sector partners.

A surprisingly realistic-looking video game trailer that racked up more than 70 million views on Twitter last week is not a hoax, Axios' Stephen Totilo reports.

Driving the news: The game, called Unrecord, became a sensation last week, sparking debates about its authenticity and choice of subject matter.

• It's the work of a little-known French indie outfit Studio Drama, whose leader used to be in a popular French rap group called Columbine.

Details: The promotional clip, published Wednesday, shows a game that is played in a first-person perspective, seemingly from the lens of a police officer’s body camera, as they enter a building and engage in a shootout.

• While onlookers have debated whether the trailer's life-like graphics were too good to be true, the developers said on Thursday that the footage was actual gameplay, not inserted clips of real-world video.
• On Friday, the game's creative director posted a new clip of the in-development game to further prove its authenticity.

A parallel debate emerged last week about the game's subject matter and how it might handle the potentially volatile topic of police use of bodycams. Some observers said the trailer made them "uncomfortable."

• "The game will obviously avoid any undesirable topics such as discrimination, racism, violence against women and minorities," the developers said in their Thursday note.
• The developers asked for the same "trust" in their artistic approach that they said is afforded to filmmakers and novelists who create fiction that features the police.

On Tap

• Today's earnings reports include Roku, eBay and Facebook parent company Meta.

Trading Places

• GitHub promoted 10-year veteran Kyle Daigle to the role of chief operating officer.
• LTK, a Softbank-based guided e-commerce startup, named Allison Yazdian as senior VP of creator growth and success.

ICYMI

• Yelp added several features to its service, including AI-powered search and the ability to include short videos in reviews. (TechCrunch)
• Axios Gaming's Stephen Totilo got an advance look at Nintendo's forthcoming The Legend of Zelda: Tears of the Kingdom, finding it "exhilarating but dauntingly complex." (Axios)

Even if you don't care about cryptocurrency, you should totally watch John Oliver talk about cryptocurrency.