On Thursday, Alphabet announced its first-ever dividend and $70 billion stock buyback, which ecstatic investors and shot the stock up almost 16% after the bell.
Alphabet’s financial performance for the three months ended March 31 was impressive. Sales reached $67.6 billion, surpassing the average projection of $66.1 billion by a significant margin. This robust performance was further underscored by the net income of $1.89 per share, which exceeded Wall Street’s estimate of $1.53 per share.
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In addition, the company announced that it would repurchase an additional $70 billion in stock and pay its first-ever dividend of 20 cents per share. Overnight trading saw a 13% increase in the shares.
Alphabet Beats Revenue Estimates as AI Fuels Cloud Growth – Google is primed to surf the AI wave, headlines notwithstanding. https://t.co/tPhAb9UktE
— Bayo Adebogun (@BayoAdebogun) April 26, 2024
AI drives cloud development
Alphabet, like many other leading tech firms, has been making substantial investments in artificial intelligence research and development. This strategic focus has not only enhanced the company’s technological capabilities but also fueled the demand for its cloud services. This was evident in the 28% increase in revenue reported in the first quarter, positioning Alphabet as a strong contender in the cloud computing market.
During a Thursday earnings call, alphabet CEO Sundar Pichai acknowledged that Google’s search engine played a significant role in the company’s first-quarter performance. However, the executive also emphasized Google Cloud’s contributions, which include generative AI services now that Google’s AI model, Gemini, is available.
“In Cloud, we have announced more than 1,000 new products and features over the past eight months. At Google Cloud Next, more than 300 customers and partners spoke about their generative AI successes with Google Cloud, including global brands like Bayer, Cintas, Mercedes Benz, Walmart, and many more,” Pichai informed investors in the call.
According to Ruth Porat, Alphabet’s chief financial officer, Google’s cloud division generated $9.6 billion in revenue. She attributed some of this revenue to “an increasing contribution from AI.”
Google developed many of the underlying technologies driving the current AI boom and has integrated them into various products, including web search, its enterprise software suite, which includes Gmail and Google Docs, and web search.
AI boom in other tech companies
Additionally, Microsoft reported that its cloud services contributed to a positive quarter.
According to a press release, Microsoft generated $26.7 billion in revenue from its cloud products, including Azure. According to the company, AI accounted for 7% of Azure’s growth.
The press release’s only comment from Microsoft CEO Satya Nadella emphasizes the company’s investment in AI, specifically in Microsoft Copilot, an AI assistant for Azure.
“Microsoft Copilot and Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” Nadella said in the press release.
Investors seemed happy with Microsoft’s and Alphabet’s quarterly results, which resulted in a spike in the companies’ stock prices, even though Wall Street is still recovering from Meta’s first-quarter announcement.
In contrast to Meta, Google’s most recent performance indicates that the company’s growth is still driven by the world’s largest digital advertising machine—thanks to YouTube and search—and search. Search advertising continues to be the backbone of Google’s extremely profitable business, with revenue up 14% to $46.2 billion. However, the company is also up against more competition there.
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