Google parent Alphabet (GOOG) reported strong first-quarter results, with both revenue and earnings coming in ahead of analyst estimates thanks to solid growth in its advertising business. The company also announced a 5 percent increase in its quarterly dividend to $0.21 per share, as well as a new $70 billion share repurchase authorization.
Alphabet stock has come under pressure, falling about 13 percent so far this year, as investors grapple with multiple antitrust lawsuits the company faces even as new competitive threats emerge from artificial intelligence. Google has long dominated online search, but new AI rivals such as OpenAI’s ChatGPT and Perplexity threaten to upend how people look for information online.
The first-quarter results should calm investors’ concerns for now, but the outlook for the rest of the year is clouded by how a tariff-induced economic slowdown could impact Alphabet’s massive advertising business. Its shares were up about 3 percent in early trading Friday.
Here’s what else investors should know about the company’s first-quarter results.
Alphabet’s first-quarter results
- Q1 revenue increased 12 percent from the previous year to $90.2 billion.
- Operating income rose 20 percent to $30.6 billion.
- Diluted EPS was $2.81, compared to analyst estimates of $2.01.
Some analysts worried that Alphabet’s results could show a slowdown in advertising spending as companies navigate the uncertainty created by new tariffs. There were also concerns that new Google features such as AI Overviews would hurt profits at the search giant.
“Search saw continued strong growth, boosted by the engagement we’re seeing with features like AI Overviews, which now has 1.5 billion users per month,” Alphabet CEO Sundar Pichai said.
Alphabet doesn’t issue formal guidance like some companies do, but Chief Business Officer Philipp Schindler said on a conference call with investors that the company could be impacted by new tariff policies that might hurt ad spending by Asian retailers. The Trump administration is eliminating the de minimis exemption for products from China that allowed companies to avoid taxes on goods shipped to the U.S. valued at less than $800.
“I mean we’re obviously not immune to the macro environment,” Schindler said. “But we wouldn’t want to speculate about potential impacts beyond noting that the changes to the de minimis exemption will obviously cause a slight headwind to our ads business in 2025 primarily from APAC-based retailers.”
Alphabet also reaffirmed that it plans to spend about $75 billion on capital expenditures this year as it races to build out its AI capabilities.
Antitrust lawsuits, AI threats weigh on Alphabet’s stock
Alphabet’s results show the company’s continued strength even as it faces challenges on several fronts.
Google has been found to hold illegal monopolies in online search and some ad technology by two different federal judges in recent months. A three-week hearing is currently underway to determine how to restore competition to the online search market, which could see the forced sale of Google’s Chrome browser, as well as other remedies.
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The rulings come as Google’s search business is under threat from new AI products that increasingly give consumers answers to questions, rather than a list of links to find answers. The company has made changes to its search results, offering more direct answers to queries in the form of AI Overviews, but investors have been skeptical that approach will be as profitable as the traditional search business.
The company said that the first quarter saw its largest expansion of AI Overviews, with the feature now available in 15 languages across 140 countries, and — critically for investors — it sees monetization at “approximately the same rate.”
Alphabet’s stock has fallen about 20 percent from its all-time high and trades at the lowest earnings multiple of any company in the Magnificent Seven. But low expectations can sometimes be a good thing for investors.
“While we believe investor concerns around a tariff-induced digital ad spending slowdown and antitrust-related impact on Alphabet’s business are valid, we think the selloff in the firm’s shares has been overly punitive, creating an attractive buying opportunity,” Malik Ahmed Khan, an equity analyst at Morningstar, wrote in a note to clients.
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.
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