Google parent company Alphabet delights investors with first-ever dividend and $70 billion stock buyback

Alphabet made waves in the financial world as it announced its inaugural dividend alongside a hefty $70 billion stock buyback plan on Thursday. The news sent investors into a frenzy, propelling the Google parent company's shares up by a staggering 16% in after-hours trading.

This move marks Alphabet's foray into returning capital to shareholders while simultaneously investing billions into expanding its data centres. These investments are strategically aimed at bolstering its capabilities in generative artificial intelligence, an arena where it aims to close the gap with its competitors.

The dividend, set at 20 cents per share, comes on the heels of similar moves by other tech giants. Just three months ago, Alphabet's rival Meta Platforms announced its own inaugural dividend, leading to a staggering $196 billion increase in its market value the following day. Notably, Amazon.com stands as the lone holdout among major tech firms, yet to offer a dividend to its investors.

Alphabet surpassed expectations for the quarter across various metrics, including sales, profit, and advertising revenue, all of which are closely monitored by industry analysts.

The post-announcement surge in Alphabet's share price boosted its market value by approximately $300 billion, crossing the $2 trillion mark.

During the results discussion, CEO Sundar Pichai highlighted the pivotal role of Google's AI offerings in enhancing its core search results. Pichai expressed optimism about the increasing usage of AI-enhanced search functionalities among users.

Alphabet reported a revenue of $80.54 billion for the quarter ended March 31, surpassing estimates. This revenue surge was propelled by heightened demand for its cloud services, driven by the growing adoption of artificial intelligence and sustained advertising expenditure.

Advertising sales for Google soared by 13% to $61.7 billion in the quarter, surpassing analyst estimates. Additionally, Google Cloud revenue witnessed a remarkable 28% growth, underpinned by the burgeoning demand for generative AI tools.

Despite a substantial increase in capital expenditures, Alphabet's CFO Ruth Porat expressed confidence in maintaining or exceeding the current expenditure levels throughout the year. Porat also hinted at an anticipated rise in operating margin for 2024, without delving into specifics.

Alphabet's cloud services have emerged as an attractive proposition for venture capital-backed startups venturing into generative AI technologies, owing to their competitive pricing and seamless integration capabilities.