Google parent Alphabet announces first dividend as Q1 profits surge; $70B stock repurchase sparks share rally

Google parent Alphabet reported a surge in profit in the first quarter of 2024, driven by growth in search and cloud businesses.

The California-based company’s net profit in Q1 rose 57.2% to $23.6 billion (or $1.89 per share) from $15 billion ($1.17 per share) in the year-ago period. Its revenue in the quarter surged by 15.4% to $80.5 billion from $69.8 billion in the same period last year.

The internet giant also declared its first-ever cash dividend of $0.20 per share and a $70-billion stock repurchase authorisation, leading to its stocks surging about 16% in after-hours trading.

Alphabet’s inaugural dividend payout follows Meta's plans, which announced its first dividend in February. Among the Big Tech giants, Amazon is the only company not offering a dividend.

“It was a great quarter led by strong performance from Search, YouTube, and Cloud,” Sundar Pichai, Chief Executive Officer of Alphabet and Google, said during the first quarter earnings call.

“Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” he noted.

The majority of Alphabet’s revenue is derived from Google ads. Its advertising revenue, including Google Search, YouTube ads, and Google Network, was up 13% to $61.6 billion in the first quarter compared to $54.5 billion in the same period last year.

“We are encouraged that we are seeing an increase in search usage among people who use the new AI overviews as well as increased user satisfaction with the results,” Pichai remarked.

The company said that revenue from its largest business, Google’s search, rose 14.4% to $46.2 billion in Q1 led by growth in retail. Meanwhile, YouTube’s ad sales in Q1 increased by 21% to $8.1 billion “driven by both direct response and brand advertising”.

Its cloud computing unit, Google Cloud Platform, which competes with Microsoft Azure and Amazon Web Services, saw its revenue rise 28% to $9.6 billion in Q1 compared to $7.5 billion in the previous year.

Operating income in Google’s cloud division surged to $900 million, more than quadrupling the previous year.

“The growth we are seeing across Cloud is underpinned by the benefits AI provides for our customers,” said Ruth Porat, Chief Financial Officer of Alphabet and Google, during the first quarter earnings call.

Pichai noted that the firm is committed to making the investments required to keep it at the leading edge in technical infrastructure to “fuel growth in Cloud, help the company push the frontiers of AI models, enabling innovation across its services, especially in Search.”

Google introduced its largest and most capable AI model—Gemini—in December, and a few months later, it rolled out Gemini 1.5 Pro.

Earlier this month, the company said it is consolidating teams that focus on building AI models across Google Research and Google DeepMind to further accelerate its progress in artificial intelligence.

Pichai noted that the company remains focused on long-term efforts to durably reengineer its cost base. “We continue to manage our headcount growth and align teams with our highest priority areas. This speeds up decision-making, reduces layers, and enables us to invest in the right areas,” he added.

As of March 31, 2024, Alphabet’s employee count was 180,895, down from 190,711 in the same period last year.

The quarter-on-quarter decline in headcount in Q1 reflects Alphabet's actions over the past few months and a much slower pace of hiring, Porat said, adding that the company continues to invest in top engineering and technical talent, particularly in Cloud, Google DeepMind, and technical infrastructure.

Porat highlighted that the reported capital expenditure in Q1 was $12 billion, overwhelmingly driven by investment in its technical infrastructure, largely for servers followed by data centres.

“The significant year-on-year growth in capex in recent quarters reflects our confidence in the opportunities offered by AI across our business,” she said.