Alphabet, the parent company of Google, has declared its inaugural dividend and unveiled a substantial USD 70 billion stock buyback plan, a move that led to a near 16 per cent growth in its stock price after hours. This announcement marks a significant milestone for the tech giant, which has historically reinvested earnings back into its diverse and growing portfolio.
During the Q1 earnings call, Alphabet reported a robust financial performance, surpassing analyst expectations with a total revenue of USD 80.54 billion against forecasts of USD 78.59 billion. The increase was driven by a 13 per cent rise in advertising sales, which totaled USD 61.7 billion, and a notable 28 per cent growth in Google Cloud revenue, reflecting the burgeoning demand for cloud services and generative artificial intelligence (AI) tools.
The company’s strategic emphasis on AI was evident as CEO Sundar Pichai highlighted the enhanced search usage attributed to improved AI functionalities. Despite Alphabet's significant capital expenditures, which saw a 91 per cent year-over-year increase to USD 12 billion, CFO Ruth Porat projected an optimistic outlook for operating margins in 2024.
Alphabet's bold steps in returning capital to shareholders through dividends and buybacks have been well received, especially following similar moves by Big Tech counterpart Meta Platforms. However, challenges loom large, as illustrated by the backlash against Google’s AI-powered chatbot, Gemini, which was criticised for generating historically inaccurate images. The company has acknowledged these issues and is actively working towards resolutions.
