Alphabet makes historic move with first dividend, $70 bn buyback; stocks skyrocket

Alphabet, the parent company of Google, made headlines on Thursday with its announcement of its first-ever dividend and a $70 billion stock buyback.

This sparked a frenzy among investors, propelling Alphabet's stock price nearly 16 per cent higher after the news.

To reassure investors while advancing its technological infrastructure, Alphabet revealed plans to distribute a dividend of 20 cents per share.

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This comes as the company made heavy investments in data centres, aimed at narrowing the gap with competitors in generative artificial intelligence.

Alphabet's dividend debut follows a similar step taken by its Big Tech counterpart, Meta Platforms, just three months ago, which resulted in a boost to Meta's market value.

Notably, Amazon remains the lone company among tech giants that is yet to announce dividend pay-outs.

Reuters cited Thomas Monteiro, a senior analyst at Investing.com, who hailed Alphabet's decision, saying that it was both a boon for the tech market and a smart move by the search engine titan amidst challenging times.

The strong earnings performance further strengthened investor confidence in Alphabet's business operations.

The after-hours surge in Alphabet's share price, nearing 16 per cent, translated to an increase in its market capitalisation, surpassing the $2 trillion mark.

CEO Sundar Pichai acknowledged the critical role of Google's AI advancements in enhancing core search functionality, highlighting the growing adoption of AI-driven features.

Alphabet's strong first-quarter performance exceeded market expectations, with revenue reaching $80.54 billion, surpassing estimates.

This was supported by strong demand for its cloud services, brought by the increasing integration of artificial intelligence and sustained advertising expenditure.

Google's advertising revenue witnessed a notable uptick of 13 per cent in the quarter, totalling $61.7 billion, outpacing projections.

Despite grappling with increased capital expenditures, which increased by 91 per cent year-over-year to $12 billion, Alphabet remains bullish on its outlook.

CFO Ruth Porat foresees sustained high levels of expenditure throughout the year, particularly in bolstering artificial intelligence capabilities.

Google Cloud, a key revenue driver, experienced a growth of 28 per cent in the first quarter, pushed by the increasing demand for generative AI tools.

These cloud-based solutions have become increasingly attractive to start-ups and businesses seeking innovative AI-driven solutions.

(With inputs from Reuters)