Alphabet announced this Thursday the first dividend in its history and also a share buyback worth 70 billion dollars (about 65.24 billion euros), two decisions made by its board of directors that encouraged investors and raised the price of its titles by almost 16% after the close of the session on the Wall Street market in New York, which has increased its stock market value by about 300,000 million dollars to exceed 2 trillion in total. At the same time, the parent company of the digital giant Google announced clearly positive results during the first quarter.
However, according to different analysts, the American multinational is returning capital to its partners in a hitherto unprecedented decision that it intends to make frequent – its managers intend that in the future the distribution of profits will be quarterly, although they did not specify when they would make this change. -, while spending billions of dollars on data centers to catch up with rivals in generative artificial intelligence. For now, this first dividend will be 20 cents per share and is scheduled to be paid on June 17, as has already been communicated to the United States Securities and Exchange Commission (SEC).
Just three months ago, Meta Platforms, one of its main rivals in the big technology sector and which brings together large firms such as Facebook and WhatsApp, also announced its first dividend – in its case of $0.50 per share, already paid on March 26 -, a measure that the next day raised the group's stock market value by $196 billion. Amazon.com remains today the only major technology company that does not offer dividends.
“Very smart strategy”
These two measures announced by the Alphabet board (the dividend and the multimillion-dollar share buyback) were highly valued by analysts, in addition to their “solid results,” according to Reuters. “Not only are they a breath of fresh air for the technology market as a whole, but also a very smart strategy for the search engine giant at a difficult time of the year,” said Thomas Monteiro, expert at Investing.com. .
And the Google parent company exceeded expectations for the first quarter in both sales, profits and advertising, all metrics closely monitored by specialists. Thus, its income was 80,539 million dollars (around 75,000 million euros) compared to estimates of 78,590 million dollars, which represents an improvement of 15% compared to its turnover in the same period of 2023. Likewise, its Profits skyrocketed 57%, up to 23,662 million dollars (about 22,000 million euros).
In a phone call to discuss the results, the corporation's CEO, Sundar Pichai, touted Google's artificial intelligence (AI) offerings as a boon to its top search results. “We are encouraged that we are seeing an increase in search usage among people who are using AI summaries,” he said. And the increase in demand for its cloud services, thanks to the growing adoption of artificial intelligence, and constant advertising spending boosted its search business between last January and March.
Improvement in advertising
Google had reported that its advertising revenue increased 13% in the quarter to $61.7 billion (€57.5 billion), thus improving the previous average estimate of $60.2 billion. In any case, Alphabet was coming off a fourth quarter of 2023 in which ad sales did not reach the expected goal, causing its shares to fall amid growing competition from Amazon.com, Facebook and new competitors such as TikTok, although this network social faces an uncertain future in the United States once President Joe Biden has signed a bill that would ban the popular application if it does not sell its shares to another majority shareholder – totally disconnected from China – in less than a year.
Meanwhile, revenue through Google Cloud grew 28% in the first quarter, driven by the rise of generative AI tools that rely on cloud services to deliver the technology to customers. These types of proposals are attractive to startups and emerging companies backed by venture capital that develop technologies of this type of artificial intelligence, due to their reasonable price and ease of integration with other tools, according to different investors and experts.
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