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Alphabet's revenue rose 15 percent in the primary quarter and the corporate announced its first dividend of 20 cents per share and a $70 billion share buyback, driven by an increase in profits across all major businesses.
Google parent company's revenue rose to $80.5 billion from $69.8 billion a 12 months earlier, beating analysts' expectations of $79 billion, a study found submission on Thursday. Earnings per share were $1.89, up from $1.17 last 12 months and above the common estimate of $1.53.
Shares rose 13 percent in after-hours trading, adding greater than $250 billion to market capitalization and taking their value to over $2 trillion, joining “Magnificent Seven” rivals Microsoft, Apple and Nvidia.
CEO Sundar Pichai said the quarter represented a “strong performance from search, YouTube and cloud” and that Google is “well on the right track in our Gemini era,” citing its large language model with generative artificial intelligence.
“Our leadership in AI research and infrastructure, in addition to our global product presence, position us well for the following wave of AI innovation,” he added.
The first-quarter dividend totaled nearly $2.5 billion, and the board said it intended to “pay quarterly money dividends going forward,” a symbolic policy shift for the tech giant that had previously only conducted share buybacks.
The financial and AI investment plans of Google and Microsoft, which were also reported on Thursday, are particularly in focus given the experiences of their competitor Meta. The social media giant's shares plunged on Wednesday after Chief Executive Mark Zuckerberg said he would spend billions greater than planned on AI and warned that costs would need to “rise meaningfully” before we start with a few of these latest products generate large amounts of income.”
While Alphabet's capital spending rose to $12 billion within the quarter – greater than the $10 billion forecast – its operating margin still rose to 32 percent from 25 percent a 12 months ago, beating expectations of 29 percent.
Chief Financial Officer Ruth Porat said the measure “confirms ongoing efforts to permanently reshape our cost base.”
Brad Erickson, an analyst at RBC Capital Markets, said: “Perhaps an important thing in comparison with the stock's big after-hours move was that margins were well above expectations.”
It “provides significantly higher data on management's commitment to achieving cost savings over the following few years,” Erickson added.
Advertising revenue from search and YouTube, which accounts for greater than three-quarters of Google's revenue, rose 13 percent to $61.7 billion, compared with analysts' consensus forecast of $60.2 billion.
Google's cloud services business revenue also rose 28 percent to $9.6 billion as firms seek access to its vast computing power and chip infrastructure to coach LLM models and ride the AI wave.
This is a giant boost for Pichai, who has been criticized for being slower to commercialize generative AI – particularly resulting from Microsoft's $13 billion partnership with OpenAI and the much-touted ChatGPT – despite the fact that the technology itself has been approved by its researchers was developed.
It also helps Google get well from a setback in February when it paused imaging in Gemini following an uproar over its inaccurate historical depiction of various ethnicities and genders.
Google will provide more details on its AI and search plans at its annual I/O developer conference on May 14 and 15 at its headquarters in Mountain View, California.
