Alphabet announces first-ever dividend, shares soar as company beats sales, profit forecasts

Alphabet, Google’s parent company, made waves on Thursday by announcing its inaugural dividend and a massive $70 billion stock buyback programme. Investors responded with enthusiasm, driving the stock up nearly 16 per cent in after-hours trading.

The decision to return capital to shareholders comes as Alphabet ramps up investments in data centres to bolster its generative artificial intelligence capabilities. The dividend, set at 20 cents per share, marks a significant milestone for the tech giant.

Just a few months ago, Alphabet’s rival Meta Platforms also announced its first-ever dividend, which sent its market value soaring by $196 billion the following day. With this move, Amazon.com remains the only major tech firm yet to offer a dividend.

Alphabet exceeded expectations across the board for the quarter, reporting strong sales, profit, and advertising figures. Thomas Monteiro, senior analyst at Investing.com, hailed the dividend payouts and buybacks as a smart move for Alphabet, particularly amidst challenging market conditions.

Following the earnings report, Alphabet’s market value surged by about $300 billion to surpass the $2 trillion mark.

During the earnings call, CEO Sundar Pichai highlighted Google’s AI advancements as a key driver of its core search results. The company’s revenue for the quarter ended March 31 stood at $80.54 billion, beating estimates.

Advertising sales, a crucial revenue stream for Google, rose by 13 per cent to $61.7 billion, outperforming analyst projections. The strong performance in advertising was complemented by a robust 28 per cent growth in Google Cloud revenue, fueled by increased demand for generative AI tools.

Despite a significant increase in capital expenditures, Alphabet’s CFO Ruth Porat expressed confidence in maintaining or even improving the operating margin for 2024. The company’s investments in AI-powered services, particularly Google Cloud, continue to attract startups and venture capital firms.

However, Alphabet has faced criticism for its AI-powered chatbot, Gemini, which generated historically inaccurate images. The company has acknowledged these issues and is actively working to address them.

Overall, Alphabet’s foray into AI and its commitment to returning capital to shareholders signal a promising trajectory for the tech giant amidst intensifying competition and evolving market dynamics.

(With inputs from agencies)