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Alphabet: Advertising Business Accelerates Again - Dividend Announced for the First Time

On Thursday, April 25, the technology group Alphabet published its results for the first quarter of 2024 and exceeded analysts' estimates. Among other things, profits in the cloud division were impressive.

Here are the results in detail:

Earnings per share: $1.89 compared to expected $1.51 (LSEG)
Revenue: $80.54 billion compared to the expected $78.59 billion (LSEG)
YouTube advertising revenue: $8.09 billion compared to expected $7.72 billion (StreetAccount).
Google Cloud revenue: $9.57 billion compared to expected $9.35 billion (StreetAccount).

Revenue increased by 15% to $80.54 billion, the fastest pace of growth since the beginning of 2022. Net income increased by 57% to $23.66 billion ($1.89 per share). Both YouTube and cloud revenues exceeded Wall Street expectations. Previously, investors had been concerned about the future of online advertising, partly due to new generative AI services such as OpenAI's ChatGPT. This would offer consumers new ways to access information, CNBC commented.

Advertising business accelerates again after a difficult previous year
The core advertising business declined in 2022 and 2023, partly due to rising interest rates and inflation concerns. The situation had prompted brands to reduce their spending. However, the advertising business has now picked up again. Advertising revenue climbed from $54.5 billion in the previous year to $61.66 billion. CFO Ruth Porat was very pleased with the momentum in the advertising business and emphasized the broad-based growth of search.

Operating result in the cloud segment more than quadrupled
After years of investment, significant profits have now also been generated in the cloud segment. The operating result has more than quadrupled to $900 million.

Alphabet CEO Sundar Pichai commented that the Q1 results reflected the strong performance of search, YouTube and the cloud. He emphasized that the company is well positioned in the Gemini era and that there is great momentum across the company.

AI tools could be monetized in the coming quarters
Alphabet is investing heavily in artificial intelligence and adding generative AI capabilities to search and other services to ensure consumers continue to use Google tools. Pichai commented that the company is well positioned for the next wave of AI innovation with its leading position in AI research and infrastructure and its global product portfolio. Alphabet is consolidating teams focused on building AI models at Google Research and Google DeepMind, according to CNBC.

Pichai noted that the company has received "early confirmations" that it can expand search capabilities with AI, citing launches in the US and UK. Alphabet could both manage spending and monetize AI tools in the coming quarters, Pichai said.

Cash dividend of $0.20 and $70 billion buyback program
The group also announced that its board has approved a cash dividend of $0.20 per share to be paid to shareholders on June 17. The dividend is to be paid to all classes of shares, including Super Voting Class "B" shares and Non-Voting Class C shares. The company intends to pay quarterly cash dividends in the future.

In addition, a buyback program of - 70 billion $ has been approved. In the previous year, the Group had approved a buyback program at the same level during a period of intensive cost cutting and layoffs.

The dividend announcement follows that of social media company Meta, which announced its first dividend in February. Investors rewarded Meta's efforts and drove the share price up as a result of the dividend initiative.

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