Google’s parent company, Alphabet Inc. , has reported another quarter of strong growth and has announced its first-ever quarterly dividend.
The tech giant’s latest quarterly report shows it continues to enjoy double-digit revenue gains from its digital advertising empire, while also exploring new opportunities in artificial intelligence. The results for the first three months of the year indicate that Google has bounced back after an unprecedented downturn in 2022 due to the pandemic.
Alphabet also revealed plans to start paying shareholders a quarterly dividend for the first time since Google went public two decades ago. This move follows in the footsteps of tech powerhouses Microsoft and Apple, who have been paying dividends for years. Alphabet’s quarterly dividend of 20 cents per share will be paid on June 17.
Investing.com analyst Thomas Monteiro hailed the decision to pay a dividend as “a breath of fresh air for the tech market”. He suggested it could make investors more likely to back the increased spending Google will likely need for developing AI products, which could take years to yield returns.
During the January-March period, Alphabet’s revenue climbed 15% from the same time last year to $80.54billion, surpassing analysts’ projections surveyed by FactSet Research. This marks the fourth consecutive quarter of accelerating year-on-year revenue growth for the Mountain View, California-based company.
Alphabet earned $23.66billion, or $1.89 per share, a 57% 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 said in a conference call with analysts.
Google’s stock price surged by nearly 13% in after-hours trading following the news. The reaction contrasted sharply with investors’ response to Meta Platforms’ first-quarter earnings report, released earlier this week. Meta Platforms, Facebook’s parent company, also reported a jump in ad revenue but offered a disappointing outlook for the April-June period, citing increased spending on AI technology as a factor that would squeeze profits.
Should Alphabet’s shares follow a similar trajectory during Friday’s regular trading session, the stock will mark a new all-time high, pushing the company’s market value above $2trillion. Digital advertising, primarily driven by Google’s dominant search engine, continues to be the company’s main revenue source. Google’s ad revenue reached $61.66billion in the first quarter, a 13% increase from the same period last year.
However, Google faces two major threats that could hinder its future growth. The US Department of Justice is targeting Google’s search engine in a lawsuit, alleging that the tech giant has abused its power by striking lucrative deals with Apple and other firms to gain an unfair advantage over potential competitors, thereby stifling innovation and competition.
Following a two-month trial last autumn, the closing arguments in the most significant US antitrust case in a quarter-century are set to take place next week. A federal judge is anticipated to decide by the end of this year whether Google has been violating the law.
As artificial intelligence technology developed by Google, Microsoft, and other industry heavyweights becomes more advanced, people may not need to depend as heavily on Google’s search information to answer their queries and find other data. If AI gradually takes over the role that Google’s search engine has played for the past 25 years, Alphabet’s ad sales could also decrease.
Currently, AI is contributing to rapid growth in Google’s cloud computing division, which saw its first-quarter revenue increase by 28% from last year to $9.57billion. However, the cloud division has also become a flashpoint for Google management, as dozens of employees have protested against a $1.2billion contract with the Israeli government that includes AI technology as part of Project Nimbus.
The employees protesting believe that Project Nimbus is being used lethally by the Israeli military in the Gaza war, a claim Google has refuted. The contentious issue reached a climax earlier this month during an employee sit-in at Google offices in Sunnyvale, California, and New York, resulting in over 50 workers losing their jobs.
Alphabet concluded March with nearly 181,000 employees, a drop of almost 10,000 workers from the previous year. Management has gone through several rounds of mass redundancies to help increase profits while Google escalates its expenditure on AI technology.
