Alphabet Inc, the parent company of search engine Google, gave shareholders an extra treat in after hours earnings on Thursday, setting the stock up to soar. In a significant show of support in providing shareholder value, there was announced both a first-ever dividend, and a stock buyback plan of some $70 billion.
With an impressive earnings report to back this up, it is no surprise to see markets reacted positively, with Alphabet shares (NASDAQ: GOOG) ending the post market trading session up by an astonishing 11,43%. For a company the size of Alphabet, possessing just under $2trillion market cap, this adds a huge amount of value, as expansion projects also come to the fore.
Digging a little deeper into the latest over at Google HQ gives some interesting insights.
- Ad sales rose 13% to $61.7 billion (consensus $60.2 bn)
- Cloud revenue growth of 28%
- Higher than anticipated Capex ($12bn, rising 91% YoY)
- Revenue Beat – $80.54bn against consensus $78.7bn.
- EPS Beat – $1.89 against $1.50 expected
- First ever dividend to be issued – $0.20c
Alphabet's CEO Sundar Pichai suggested a future trajectory pointing towards significant expansion by projecting $100 billion in combined revenue from YouTube and Cloud businesses by the end of the year. With such projections hinting at a 25% growth rate for the next three quarters, it appears the company is shifting into a new phase of prosperity. Gene Munster of Deepwater Asset Management echoed this sentiment by underscoring the growth phase that Alphabet seems to be entering.
“Our results in the first quarter reflect strong performance from Search, YouTube and Cloud. We are well under way with our Gemini era and there's great momentum across the company. Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation.”
CEO Sundar Pichai
The company also communicated its confidence in efficiently managing costs associated with pioneering new search experiences, including generative answers. This initiative is supported by a robust $12 billion capital expenditure announced during the latest earnings call. Such announcements continue to paint a picture of a company deeply entrenched not just in maintaining its operational excellence but also in spearheading innovation.
Alphabet Inc. continues to defy the odds by reporting a strong financial performance with a 15% increase in revenue year-over-year, amounting to a whopping $80.539 billion, coupled with earnings of $1.89 per share. The tech giant outstripped analyst expectations for the fifth consecutive quarter on both revenue and earnings, delivering with consistent growth.
Dividends being issued for the first time in the major tech names brings me back to Meta, who also saw a huge surge in sentiment on their own announcement just a short time ago. On a flip flop day for the two, Meta had a day to forget as far as markets were concerned, with the other Magnificent 7 name retreating by more than 10% on the day.
Alphabet joining the ranks of tech names with dividends feels like a seminal moment in the growth sector, with other mega caps that have yet to join the dividend party likely to follow suit in time, or potentially take some value adjustment. The declaration of a dividend—a move traditionally aligned with stable, mature companies rather than growth-oriented tech firms—could reflect Alphabet's transition into a new era.
