Alphabet has extended an "olive branch" to investors, performing better than expected in the first q

Past performance has been significant, resulting in a surge in stock prices

Alphabet opens new tab announced its first-ever dividend on Thursday and a $70 billion stock buyback, cheering investors who sent the stock surging nearly 16% after the bell.

The Google parent is returning capital while spending billions of dollars on data centers to catch up with rivals on generative artificial intelligence. The dividend will be 20 cents per share.

Just three months ago, Alphabet’s Big Tech rival, Meta Platforms opens new tab, announced its own first-ever dividend, a move that lifted the social media company’s stock market value by $196 billion the following day. Amazon.com (AMZN.O), opens new tab remains the lone holdout among Big Tech firms not offering a dividend.

Alphabet beat expectations for the quarter in sales, profit and advertising - metrics that are all closely watched.

“Alphabet’s announced dividend payouts and buybacks on top of the solid earnings beat are not only a breath of fresh air for the tech market as a whole, but also a very intelligent strategy for the search engine giant going into a tough time of the year,” said Thomas Monteiro, senior analyst at Investing.com.

Alphabet’s after-hours share surge of nearly 16% following the report increased its stock market value by about $300 billion to over $2 trillion.

In a call to discuss results, CEO Sundar Pichai touted Google’s AI offerings as a boon to its core search results. “We are encouraged that we are seeing an increase in search usage among people who are using the AI overviews,” he said.

Revenue was $80.54 billion for the quarter ended March 31, compared with estimates of $78.59 billion, according to LSEG data.

The search firm’s beat on first-quarter revenue was powered by rising demand for its cloud services on the back of increasing adoption of artificial intelligence and steady advertising spending.

The future holds challenges, but there is still room for growth

Google reported advertising sales rose 13% in the quarter to $61.7 billion. That compares with the average estimate of $60.2 billion, according to LSEG data.

Alphabet is coming off a fourth quarter in which ad sales missed the mark, sending shares tumbling, amid rising competition from Amazon.com opens new tab, Facebook opens new tab and new entrants like TikTok. The latter faces an uncertain future after President Joe Biden signed a bill that would ban the popular app if it is not sold within the next nine to 12 months.

Meanwhile, Google Cloud revenue grew 28% in the first quarter, boosted by a boom in generative AI tools that rely on cloud services to deliver the technology to customers.

Alphabet’s capital expenditures were $12 billion, a 91% rise from a year prior, a figure Gabelli Funds portfolio manager Hanna Howard called “higher than anticipated.”

Still, CFO Ruth Porat said on the call with analysts that she expects such expenditures to be at that level or higher throughout the remainder of the year, as the company spends to build artificial-intelligence offerings.

Despite the surge in capital expenditures, Porat said operating margin in 2024 would be higher than last year, without elaborating.

Google’s cloud services are attractive for venture capital-backed startups developing generative AI technologies due to their pricing and ease of integration with other tools, investors and experts have previously said.

Summary

Overall, Alphabet has its own product advantages and still has great potential for development in the future. Its announcement of the first dividend of 20 cents per share also marks a significant capital return for the company in the Data Center to enhance its ability to generate artificial intelligence. Coupled with the $70 billion stock buyback plan, these two actions reflect Alphabet’s continued commitment to capital returns, providing confidence for investors who want to enter the market. If investors want to enter the market, they can monitor the stock market trend through the multi-asset trading wallet BiyaPay at any time, find suitable opportunities to deposit U directly into US dollars, and invest directly on the platform without offshore accounts. In addition, investors can also bind the offshore account of Jiaxin Wealth Management in BiyaPay, withdraw US dollars to Jiaxin for investment, withdraw on the same day, and arrive on the same day without delaying the market.

Source: Reuters
Editor: BiyaPay Finance