Google parent Alphabet Inc. reported first-quarter revenue and profit that exceeded analysts’ expectations, buoyed by continued strength in its search advertising business.
First-quarter sales, excluding partner payouts, were $76.5 billion (€67.4 billion), the company said on Thursday in a statement. Analysts had expected $75.4 billion on average, according to data compiled by Bloomberg. Net income was $2.81 per share, compared with Wall Street’s estimate of $2.01.
The shares, which have declined 16 per cent so far this year, rose more than 5 per cent in premarket trading on Friday.
Alphabet needs to ensure momentum in its internet search advertising and cloud businesses in order to justify its heightened investment in the artificial intelligence race. Competition is prompting the company and its rivals to spend heavily on infrastructure, research and talent. While Google benefits from AI start-ups spending on its cloud and business tools, it is also racing to present an answer to popular conversational AI chatbots, which consumers are beginning to think of as an alternative to using Google Search.
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Google’s beginning of the answer to that threat – its “AI Overviews” and “AI Mode” in search, in which summarised responses are drafted by generative AI and highlighted ahead of Google’s web links – have seen mixed success. Meanwhile, Google’s AI changes to search have decimated traffic to independent websites across the open web.
The company’s first-quarter earnings included an $8 billion “unrealised gain on our non-marketable equity securities related to our investment in a private company,” according to a filing.
The private company, which Alphabet did not name in its report, is Elon Musk’s Space Exploration Technologies Corp, according to a person familiar with the matter, who asked not to be named disclosing nonpublic information. Google has been an investor in SpaceX since at least 2015, when it joined Fidelity Investments in a $1 billion investment for a combined stake of about 10 per cent, Bloomberg reported at the time.
Google Cloud brought in operating profit of $2.18 billion, beating analysts’ estimates for $1.94 billion despite slightly missing expectations on sales. The results indicate that Google may be eking out more profits from Cloud even as sales slow.
Alphabet’s upbeat report sets a high bar for its digital-advertising peers, including Meta Platforms Inc and Amazon.com Inc, which are scheduled to disclose earnings next week. Investors are watching big internet companies for signs of volatility in the advertising market or business disruptions caused by geopolitical and trade tensions.
Alphabet’s board authorised a $70 billion share buyback and boosted its dividend by 5 per cent, to 21 cents a share.
