Market Analysis

Google Search Fuels Alphabet’s Strong Q1 Performance, Shares Rise

Mellissa · 25 Apr43.1K Views

Image Credit: MSN

Alphabet, the parent company of Google and YouTube, exceeded analysts' expectations with its first-quarter earnings, primarily driven by strong performance in its core search advertising business. Google Cloud, a key growth area for the company, also saw a significant boost in profitability. CEO Sundar Pichai stated, "We’re pleased with our strong Q1 results, which reflect healthy growth and momentum across the business. This growth is supported by our unique full-stack approach to AI."

Alphabet's shares rose nearly 5% in after-hours trading, following a 2.5% gain during regular trading on Thursday. Despite the positive results, the stock remains down 16% year-to-date due to broader tech-sector declines caused by concerns over tariffs.

The company's board approved an additional $70 billion in share buybacks and a 5% increase in its dividend to $0.21 per share.

Google Advertising Growth

Alphabet reported total revenue of $90.2 billion, up 12% from the previous year, surpassing the expected $89.12 billion. Google’s search advertising continued to be the largest revenue contributor, generating $50.7 billion in the quarter, a 9.8% year-on-year increase. The recent launch of AI Overviews in Google Search, which provides summarized results at the top of the page, has gained traction, attracting 1.5 million users per month. However, this feature has led to decreased traffic for independent websites. Additionally, the company cautioned that US tariff policies could negatively affect advertising revenue, especially with the end of the de minimis trade exemption, which may reduce advertising spend from retailers in the Asia-Pacific region.

Google Cloud’s Profit Surge

Google Cloud’s revenue rose 28% year-on-year to $12.3 billion, driven by strong growth in Google Cloud Platform (GCP), AI infrastructure, and generative AI solutions. A highlight of the quarter was a more than 200% increase in operating income to $2.18 billion. Although revenue slightly missed forecasts, the profitability surge indicates that Alphabet’s investments in AI are starting to pay off. CFO Anat Ashkenazi mentioned that demand continues to exceed data center capacity, and Alphabet plans to invest $75 billion in capital expenditure this year. Google Cloud remains the third-largest cloud provider, following Amazon’s AWS and Microsoft’s Azure.

YouTube and Waymo Performance

YouTube ad revenue reached $8.93 billion, up 10% from the previous year, slightly below expectations but showing continued growth, especially with YouTube TV and podcasts. Alphabet's self-driving car unit, Waymo, generated $450 million in revenue, a 9% decline from the previous year. Waymo, a competitor to Tesla’s Robotaxi, remained unprofitable during the quarter. CFO Ashkenazi noted that Waymo is continuing to progress in scaling its business and building a sustainable model.