Resurgent Alphabet no longer in the soup
Google’s corporate parent, Alphabet, yesterday released a quarterly report showing it’s still reaping double-digit revenue gains from its digital advertising empire while sowing potentially lucrative new ground in artificial intelligence.
The results for the first three months of the year provided the latest evidence that Google has regained its momentum after an unprecedented downturn in 2022 coming out of the pandemic.
Alphabet punctuated its renewed vigor by disclosing plans to begin paying shareholders a quarterly dividend for the first time since since Google went public 20 years ago. It’s something that two older technology powerhouses, Microsoft and Apple, have been doing for years. Alphabet’s quarterly dividend of 20 cents per share will be paid on June 17.
Investing.com analyst Thomas Monteiro praised the decision to pay a dividend as “a breath of fresh air for the tech market” that should also make investors more likely to support the increased amounts that Google will likely need to spend on developing AI products that could take years to pay off.
In the January-March period, Alphabet’s revenue rose 15 per cent from the same time last year to US$80.54 billion, which surpassed the projections of analysts surveyed by FactSet Research. It marked the fourth consecutive quarter of accelerating year-over-year revenue growth for the Mountain View, California, company.
Alphabet earned US$23.66 billion, or US$1.89 per share, a 57 per cent increase from last year’s comparable quarter. The earnings per share also eclipsed the analyst estimates that steer investors.
“We are incredibly well set up, given the innovation path we are on,” Alphabet chief executive Sundar Pichai told analysts during a Thursday conference call.
The company’s stock price soared by nearly 13 per cent in Thursday’s extended trading after the news came out. That reaction was a stark contrast to how investors responded to a report covering the same quarter from Facebook’s parent. Meta Platforms also reported a surge in ad revenue but provided a disappointing outlook for the April-June period, while also warning its profits would be squeezed by increased spending on AI technology.
If Alphabet’s shares move in a similar trajectory during Friday’s regular trading session, the stock will hit a new all-time high that will push the company’s market value above US$2 trillion.
As has been the case since throughout the company’s history, most of the money came in through a digital advertising network anchored by Google’s dominant search engine. Google’s ad revenue totalled US$61.66 billion in the first quarter, up 13 per cent from last year.
Despite the ongoing success, Google is facing dual threats that could threaten its future growth.
The US Department of Justice is taking aim at its search engine in a lawsuit alleging the company has abused its power by negotiating lucrative deals with Apple and other companies to give it an unfair advantage over potential rivals, stifling innovation as well as competition.
After a two-month trial, the closing arguments in the biggest US antitrust case in a quarter are scheduled to unfold next week and a federal judge is expected to rule whether Google has been breaking the law by the end of this year.