Alphabet’s first-quarter profit soars as Google’s big AI bets help push stock to new highs
Google’s transition into the age of artificial intelligence continued to pay off for its parent company, Alphabet Inc., which on Wednesday reported another quarter of meteoric growth that helped more than double its already high stock value over the past year.
Alphabet earned $62.6 billion, or $5.11 per share, between January and March, an 81% increase from the same period last year. Revenue climbed 22% from last year to $109.9 billion. Both figures far exceeded the projections of analysts who guided investors.
Alphabet’s stock price rose more than 6% in extended trading after the numbers were released, helping shares hit a new high during Thursday’s regular session. The company’s market value currently stands at $4.2 trillion, up from $1.9 trillion just a year ago. If the stock follows a similar trajectory on Thursday, Alphabet’s market value could approach $4.5 trillion while creating more than $250 billion in additional shareholder wealth in a single day.
The stock gains generated by Alphabet are not matched by other big AI spenders such as Microsoft and Facebook parent Meta Platforms, whose stock price plunged about 6% in extended trading after revealing an investment strategy questioned by investors. At the same time, Microsoft shares also fell, despite reporting quarterly results that beat analysts’ forecasts.
Alphabet’s performance in the latest quarter, CEO Sundar Pichai, to celebrate the huge bets the company has placed on AI technology over the past three years. These investments, Pichai said, “inform every aspect of the business.”
As usual, digital ads powered by Google’s dominant search engine propelled growth, with revenue from those operations jumping 16% from the first quarter of last year. This is the fourth quarter in a row where Google’s ad sales have increased more than 10% year-over-year.
Google’s fastest-growing division remains its Cloud division, which has taken advantage of the AI boom to sell more products and services to businesses and government agencies, such as the deal it just struck with the US military. Google Cloud revenue jumped 63% from last year to $20 billion.
The growth is a sign that Alphabet’s frenzied spending on AI so far is paying dividends, even as investors continue to worry that the Mountain View, Calif., company and its Big Tech peers are investing too much money in a technology that is still nascent and unproven.
Alphabet, however, is betting that it’s better to overspend on AI than to be too stingy and risk being left behind.
In a previous quarterly update released in February, Alphabet revealed that it expects between $175 billion and $185 billion in capital spending this year, much of which will go toward building AI data centers and other technology-related tools.
Reflecting management’s confidence in its strategy, Anat Ashkenazi, Alphabet’s chief financial officer, told analysts on a conference call that this year’s capital spending could reach $190 billion. And even if expenses were this high, Askkenazi said they would “increase significantly” again next year.
All of this would be on top of $91 billion in capital spending in 2025.
“The key message is that Alphabet is no longer asking investors to confidently underwrite AI spending,” said Thomas Monteiro, an analyst at Investing.com.
