Alphabet (GOOG, GOOGL) announced a new $70 billion stock repurchase program and a 5% dividend increase on Thursday, along with better-than-expected first quarter earnings and revenue that exceeded analyst projections. After the release, the Google parent company’s stock jumped more than 3%. According to Bloomberg consensus data, Alphabet reported earnings per share of $2.81 on $90.2 billion in revenue for the quarter that ended in March. This was significantly higher than Wall Street’s expectations of $2.01 EPS and $89.1 billion in revenue. Compared to last year’s Q1 results, when Alphabet reported $1.89 EPS on $80.5 billion in revenue, that represents a significant increase. The company’s main business, advertising, generated $66.8 billion, slightly exceeding the $66.4 billion forecast.
Alphabet Surges on Strong Q1 Results
Google Cloud’s revenue of $12.2 billion was marginally less than expected, but it was still a substantial rise from $9.5 billion in the previous year. Following President Trump’s “Liberation Day” tariff announcement, which shook markets and sparked new concerns about a recession later in the year, Alphabet was among the first tech behemoths to release their earnings. In the second half, analysts are keeping a close eye on whether the ongoing economic and geopolitical unrest will have an impact on cloud growth and digital advertising. Some online commerce activity has already slowed, according to a recent research note from Barclays analyst Ross Sandler. “Given the macro noise, we would expect digital ads to weaken in 2Q, as we have seen some transaction velocity in e-commerce drop off recently,” Sandler wrote.
Additionally, Alphabet is dealing with the consequences of consecutive antitrust court losses in the United States. A federal judge declared last week that Google has an unlawful monopoly in the digital advertising market; this ruling may compel the company to reorganize or spin off portions of its advertising division. This setback comes after another judge ruled last year that Google’s monopoly on search and advertising was illegal under antitrust laws. Alphabet’s aggressive capital return plans and solid quarterly performance show confidence in the company’s long-term trajectory, despite the legal challenges and uncertain macro environment. Similar actions taken by other tech giants to reassure investors in the face of market volatility and regulatory pressure are reflected in the recently approved $70 billion share buyback. Alphabet’s earnings will probably set the tone for other tech companies preparing for economic challenges and increased Washington scrutiny as Big Tech enters its earnings season.
Featured Image Credit: Brett Jordan; Pexels: Thank You!
