Alphabet Stock Rises on Earnings Beat

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Alphabet stock has rallied about 20% so far this year.


Angel Garcia/Bloomberg

Shares of Google-parent
Alphabet
were rising after the big technology firm reported better-than-expected earnings and announced an additional $70 billion in stock buybacks.

Alphabet said first-quarter earnings were $1.17 a share, compared to the consensus estimate of $1.08, according to FactSet. Revenue of $69.79 billion was ahead of expectations for $68.89 billion.

The company said its board had expanded its share repurchase program by up to $70 billion.

Alphabet shares jumped almost 4% in late trading shortly after the numbers were released.

“We introduced important product updates anchored in deep computer science and AI,” CEO Sundar Pichai said in the earnings press release. “Our North Star is providing the most helpful answers for our users, and we see huge opportunities ahead, continuing our long track record of innovation.”

During the company’s quarterly earnings call, Pichai touted the firm’s investments in AI, and laid out a laundry list of existing and future applications for the technology, such as better searches and better advertising features.

Chief Financial Officer Ruth Porat said the results reflected ongoing headwinds due to a challenging economic environment.

“The outlook remains uncertain,” she added.

The firm expects less of a foreign exchange headwind during the second quarter, pointing to current spot rates. Porat said the company is taking steps to slow the pace of operating expense growth while creating room for investing in AI and other key areas.

Alphabet,
along with Microsoft, officially kicked off Big Tech’s earnings on a positive note. The company said revenue in its cloud segment grew 28% to $7.41 billion. Google advertising revenue was slightly lower at $54.55 billion. That includes $6.69 billion in YouTube ad revenue and $40.36 billion in Google Search & other related revenue. Google Network revenue was $7.5 billion.

Shares of Microsoft were also rising in late trading Tuesday.

Jefferies analyst Brent Thill wrote prior to the earnings report that Alphabet faced a tough setup, as the advertising environment has only worsened in the past year. On the flip side, that should make the coming quarters progressively easier to top, on a year over year basis.

Alphabet stock has rallied 20% so far this year, but has slumped 11% in the past 12 months.

“Our checks indicate relatively stable ad spend with advertisers consolidating spend to bigger platforms,” Thill wrote. “But we remain concerned about a deteriorating macro & elevated cost structure.”

Rosenblatt Securities analyst Barton Crockett, who rates Alphabet at Buy with a $128 price target, noted prior to the report that cost cuts will continue to be a major theme for big tech firms. The company said the quarter included $2.6 billion in charges related to reductions in workforce and office space.

Though worries about Microsoft’s integration of ChatGPT artificial intelligence into Bing has drawn plenty of headlines, Crockett isn’t too worried about Alphabet’s own AI efforts.

“Our checks suggest that search shares for Google and Bing are not clearly changing so far this year, with Google remaining dominant,” he wrote. “But we see GOOG as the Union Army, eventually able to martial overwhelming strength in AI, even if they start slow.”

Write to Connor Smith at [email protected]

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