Alphabet announced its first-ever dividend on Thursday and a US$70-billion stock buyback, cheering investors who sent the stock surging nearly 16% in after-hours trading.
The Google parent is returning capital while spending billions of dollars on data centres to catch up with rivals on generative artificial intelligence. The dividend will be $0.20/share.
Just three months ago, Alphabets Big Tech rival, Meta Platforms, announced its own first-ever dividend, a move that lifted the social media companys stock market value by $196-billion the following day. Amazon.com 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.
Alphabets 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.
Alphabets 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 Googles 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 31 March, compared with estimates of $78.59-billion, according to LSEG data.
Advertising steadyThe search firms beat on first-quarter revenue was powered by rising demand for its cloud services on the back of increasing adoption of AI and steady advertising spending.
' READ: Google says its AI is ready for businessMeanwhile, 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.
Alphabets capital expenditure was $12-billion, a 91% rise from a year prior, a figure Gabelli Funds portfolio manager Hanna Howard called higher than anticipated.
Still, chief financial officer Ruth Porat said on the call with analysts that she expects such expenditure to be at that level or higher throughout the remainder of the year, as the company spends to build AI offerings. Despite the surge in capex, Porat said operating margin in 2024 would be higher than last year, without elaborating.
Googles cloud services are attractive for venture capital-backed start-ups developing generative AI technologies due to their pricing and ease of integration with other tools, investors and experts have previously said. Akash Sriram and Greg Bensinger, with Noel Randewich and Aditya Soni, (c) 2024 Reuters
