Alphabet on Thursday delivered a knockout first-quarter report, with sales, operating margin and profits all topping Wall Street expectations. The search giant also reloaded its stock buyback program and initiated a quarterly dividend for the first time in its history. Total revenue in the three months ended March 31 rose 15.4% year over year to $80.54 billion, outpacing the $78.59 billion expected, according to estimates compiled by data provider LSEG. Earnings per share surged 62% on an annual basis to $1.89, exceeding the $1.51 expected, LSEG data showed. Alphabet Why we own it : Alphabet’s Google Search is an invaluable tool for advertisers. Its YouTube platform continues to gain screen time with viewers and stands to grow even more as the company looks to acquire major league sports rights. Though it did get off to a bumpy start, we believe Alphabet to be a leader in artificial intelligence research and see progress aiding cloud-computing growth over time. Competitors : Amazon , Microsoft and Meta Platforms Weight in portfolio : 2.73% Most recent buy : March 4, 2022 Initiated : July 22, 2014 Bottom line This is the earnings report we’ve been waiting for. Management finally delivered strength on the most important line items, and shares are understandably flying nearly 12% in extended trading. Alphabet’s big three watch items for investors — Search, YouTube, and Google Cloud — all delivered better-than-expected revenues in the quarter, leading to companywide sales topping estimates. Meanwhile, earnings outpaced expectations due, in large part, to a very strong operating margin of 31.6%. Management has continued to lower its cost base, which translated to strong profitability across the board. Operating income topped estimates in its Google Services segment, which is home to the search-engine business and YouTube, and in cloud-computing division Google Cloud. And its Other Bets unit, which houses speculative initiatives such as self-driving car company Waymo, reported less-than-expected losses. Cash flow generation came up a bit short versus expectations, but management still had the confidence to initiate a quarterly cash dividend of 20 cents per share and its board of directors authorized an additional $70 billion share repurchase program. Alphabet joins the likes of Meta Platforms and Salesforce as Club-owned tech companies to initiate a dividend this year. It’s no stranger to buybacks, having spent $61.5 billion on them last year, but the fresh firepower is appreciated. GOOGL YTD mountain Alphabet’s year-to-date stock performance. Alphabet CEO Sundar Pichai added to the list of positives Thursday during his prepared remarks when he said YouTube and Google Cloud were on pace to exit the year at combined annual revenue run rate north of $100 billion. This implies the two segments will have quarterly revenues totaling at least $25 billion by year-end. Alphabet has tested our patience during the generative artificial intelligence race,…
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