Alphabet’s first-quarter revenue jumped 15 per cent and it announced its first-ever dividend of 20 cents a share alongside a stock buyback of $70 billion (€65 billion), buoyed by a rise in earnings across all its main business lines.
Revenue at Google’s parent company rose to $80.5 billion from $69.8 billion a year ago, beating analysts’ expectations for $79 billion, according to a filing on Thursday. Earnings per share were $1.89, up from $1.17 last year and exceeding the average $1.53 estimate.
Shares rose 13 per cent in after-hours trading, adding more than $250 billion to its market capitalisation and pushing its value above $2 trillion, joining “Magnificent Seven” peers Microsoft, Apple and Nvidia.
Chief executive Sundar Pichai said the quarter represented a “strong performance from Search, YouTube and Cloud” and that Google is “well under way with our Gemini era”, referring to its generative artificial intelligence large language model.
“Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” he added.
The first-quarter dividend is worth almost $2.5 billion, and the board said it “intends to pay quarterly cash dividends in the future”, a symbolic policy shift for the tech giant, which had previously only used share buy-backs.
The financials and AI investment plans of Google and Microsoft, which also reported on Thursday, are in particular focus in light of the experience of rival Meta. The social media giant’s shares plunged on Wednesday after chief executive Mark Zuckerberg said he will spend billions more than planned on AI, warning costs would have to increase “meaningfully before we make much revenue from some of these new products”.
While Alphabet’s capital expenditure rose to $12 billion in the quarter – more than the $10 billion forecast – its operating margin still expanded to 32 per cent from 25 per cent a year ago, beating expectations for 29 per cent.
Chief financial officer Ruth Porat said the measure validated “ongoing efforts to durably re-engineer our cost base”.
RBC Capital Markets analyst Brad Erickson said: “Maybe most important relative to the big after-hours move in the stock was margins came significantly ahead of expectations.”
It “provides a significantly better data point around management’s commitment to deliver cost savings over the next few years,” Mr Erickson added.
Advertising revenue through search and YouTube, which accounts for more than three-quarters of Google’s top line, grew 13 per cent to $61.7 billion, compared with analysts’ consensus forecast for $60.2 billion.
Google’s Cloud services business revenue also rose 28 per cent to $9.6 billion as companies seek access to the vast computing power and chip infrastructure to train LLM models and ride the AI wave.
It is a major boost for Mr Pichai, who has been criticised for being slower to commercialise generative AI – in particular because of Microsoft’s $13 billion partnership with OpenAI and its much-hyped ChatGPT – despite the technology being created in-house by its researchers.
It also helps move Google on from a setback in February, when it paused image generation in Gemini following a furore over its inaccurate historical depiction of different ethnicities and genders.
Google will detail more of its plans in AI and search at its annual I/O developer conference on May 14th and 15th at its headquarters in Mountain View, California. – The Financial Times
