Alphabet Inc., the parent company of Google (NASDAQ:GOOGL), announced its first dividend and unveiled a $70 billion share buyback plan, sending its stock up nearly $16% in after-hours trading on Thursday. The company’s decision to begin paying a 20-cent-per-share dividend marks a significant move in its return-on-investment strategy as it continues to invest heavily in data centers and artificial intelligence to stay competitive.
The announcement comes after another tech giant, Meta Platforms, declared its first dividend three months earlier, sending its market value soaring the next day. With Amazon.com yet to pay a dividend, Alphabet’s move puts it in a strong position against its Big Tech peers.
Alphabet beat market expectations in key areas like revenue, earnings and advertising revenue for the quarter ended March 31. The company reported revenue of $80.54 billion, beating estimates of $78.59 billion. Advertising revenue rose 131TP3M to $61.7 billion, compared with the $60.2 billion expected. The growth was attributed to increased demand for Alphabet's cloud services, fueled by broader adoption of artificial intelligence and consistent advertising spending.
On a call discussing the results, CEO Sundar Pichai highlighted the positive impact of Google’s AI capabilities on its core search services. He noted an increase in search usage among users interacting with AI features.
In contrast to the previous quarter, when ad sales fell, Alphabet’s recent performance reflected a strong recovery, despite increased competition from companies like Amazon, Facebook, and new entrants like TikTok. The company’s capital expenditures jumped to $12 billion, up $91% year over year, reflecting strong investment in artificial intelligence. Despite the increase, CFO Ruth Porat predicted that operating margins would surpass last year’s in 2024, although she did not provide specific figures. She also predicted that capital expenditures would remain high or increase further throughout the year.
Google Cloud’s revenue growth of 28% in the first quarter was fueled by the popularity of its generative AI tools, which have become increasingly attractive to venture-backed startups due to their competitive pricing and seamless integration with other technologies. However, Google’s AI-powered chatbot, Gemini, has faced criticism for generating historically inaccurate content, something the company has acknowledged and is actively working to fix.
The after-hours rally in the stock price following the earnings report pushed Alphabet’s market valuation to around $300 billion, pushing it past the $2 trillion mark. The surge underscores the market’s favorable reception of Alphabet’s financial performance and strategic initiatives to return capital to shareholders while investing in future growth areas.
Source: Investing
