Alphabet shares surged in after-hours trading on Thursday after Google’s parent company impressed investors with a blowout first-quarter earnings report and initiated a $70 billion stock buyback program alongside its first-ever dividend declaration.
Alphabet reported a remarkable 15 per cent increase in revenue, reaching $80.5 billion, surpassing the anticipated $79 billion. Earnings per share also outperformed expectations, hitting $1.89 compared to the projected $1.53.
As reported by the FT, Brad Erickson from RBC Capital Markets 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”, Erickson added, the FT reported.
This stellar performance drove Alphabet’s shares up by over 11 per cent, potentially propelling its market capitalization beyond $2 trillion, putting it in league with tech giants like Microsoft, Apple, and Nvidia.
The announcement of a 20 cents per share dividend, set to be paid out on June 17th to shareholders of record as of June 10th, marked a significant milestone for the company. Alphabet also expressed its intention to continue paying dividends quarterly.
Net income witnessed a substantial 57 per cent increase, climbing to $23.66 billion compared to $15.05 billion in the previous year.
Google’s advertising revenue, which accounts for a significant portion of Alphabet’s income, showed a robust 13 per cent growth, reaching $61.7 billion, surpassing analysts’ forecasts.
The resurgence in Google’s advertising business follows a challenging period in 2022 and 2023 due to economic uncertainties.
Additionally, Google Cloud revenue experienced a notable 28 per cent increase in the first quarter, driven by heightened demand for generative AI tools.
Alphabet’s capital expenditures also saw a significant spike, rising by 91 per cent to $12 billion compared to the previous year, surpassing some analysts’ expectations.
The positive performance of Alphabet, coupled with Microsoft’s better-than-expected earnings, led to a surge in US stock index futures, particularly in the technology sector.
This latest financial report cements Alphabet’s position as a powerhouse in the tech industry and highlights its commitment to delivering value to its shareholders.
“The stock has surged nearly 50 per cent over the past year, more than double the rise in the S&P 500 index. But its forward price/earnings valuation is an undemanding 22x, only a modest premium to the S&P 500, and below its own long-term average, reflecting concerns whether it’s an AI winner or loser,” said Ben Laidler, Global Markets Strategists at eToro.
