Alphabet, the parent company of Google, announced its first-ever dividend and a $70 billion stock buyback on Thursday. This move pleased investors, who sent the stock soaring nearly 16% after the announcement. The company is returning capital to shareholders while also investing in data centers to catch up with competitors in generative artificial intelligence. The dividend will be 20 cents per share, marking a significant shift for Alphabet.
Just three months prior, Meta Platforms, a Big Tech rival of Alphabet, announced its own first-ever dividend, which resulted in a massive increase in market value. Amazon.com remains the only major tech firm that does not offer a dividend. Alphabet exceeded expectations for the quarter in terms of sales, profit, and advertising, all key metrics that investors closely monitor. The positive news, combined with the dividend and buyback announcement, has revitalized the company’s stock market value.
Alphabet’s CEO, Sundar Pichai, highlighted the growth of AI offerings within Google’s core search results during a call discussing the earnings report. The company reported revenue of $80.54 billion for the quarter, surpassing estimates. Advertising sales rose 13% to $61.7 billion, driven by increased demand for cloud services and AI technology. The company’s beat on revenue was powered by the growth of its cloud services, as well as consistent advertising spending.
Despite a challenging fourth quarter in which ad sales fell short and competition intensified, Alphabet’s first-quarter results were strong. Google Cloud revenue increased by 28%, benefiting from the surge in generative AI tools that rely on cloud services. Capital expenditures rose by 91% to $12 billion, with CFO Ruth Porat indicating that such levels will continue throughout the year as the company invests in expanding its artificial intelligence offerings.
Google’s cloud services have become appealing for startups focused on developing generative AI technologies due to their pricing and integration capabilities. The company’s AI-powered chatbot, Gemini, has faced criticism for generating historically inaccurate images. Alphabet has acknowledged these issues and is working to address them. Despite the challenges, Google remains focused on leveraging AI to drive innovation and enhance its offerings in various sectors.
Overall, Alphabet’s strong financial performance, combined with the dividend and stock buyback announcements, have boosted investor confidence and led to a significant increase in the company’s stock market value. As competition in the tech industry intensifies, Alphabet’s focus on expanding its AI capabilities and cloud services is positioning the company for continued growth and success.
