Alphabet set to hit $2 trillion valuation milestone

Google’s parent company, Alphabet, is celebrating with its investors, announcing its first-ever dividend pay-out alongside a whopping $70 billion stock buyback program.

This news comes on the heels of strong financial performance across all of Alphabet’s business units to indicate widespread economic growth. Arbiterz gathered that the company has pegged a quarterly dividend of 20 cents per share for investors, amounting to nearly $2.5 billion.

Industry analysts have noted that the move symbolizes a new policy for the tech giant, having previously relied solely on stock buybacks to return capital.

The decision to initiate a dividend echoes a trend among US tech giants as a similar development was earlier observed in Meta in 2024.

While it may reflect a shift towards sharing a larger portion of their substantial cash reserves with investors, it also suggests a potential move away from strategies focused solely on reinvestment or acquisitions.

Alphabet’s stock surged 11% in pre-market trading on Friday, fueled by the news of their first-ever dividend and a $70 billion stock buyback.

This jump positions the Google parent company ready to likely break the $2 trillion market capitalization barrier, to join the elite company of Microsoft, Apple, and Nvidia.

The tech company crushed expectations, reporting Q1 2024 revenue of $80.5 billion, a 15% jump from last year’s $69.8 billion, further beating analyst predictions of $79 billion.

Meanwhile, net income of the company has also soared, hitting $23.7 billion, a 57% increase year-over-year compared to $15.1 billion, and surpassing analyst estimates of $19.1 billion.

CEO Sundar Pichai hailed the quarter’s results, highlighting strong performances from Search, YouTube, and Cloud.

Commenting on the development, the CEO emphasized progress on Google’s “Gemini era,” hinting at the potential impact of their new generative AI technology, the Gemini LLM.

“Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation,” he said.

Also read: Google Posts Record Revenue After Strong Growth in Advert, Cloud Sales

The race in AI is heating up, and investors are closely watching Google and Microsoft’s financial health and AI plans, especially after Meta’s stock dive.

Meta CEO Mark Zuckerberg announced increased AI spending, prioritizing investment over near-term revenue.

Meanwhile, Microsoft boasts a 17% revenue increase, fueled by cloud computing and strong demand for AI services on their Azure platform, likely setting the stage for an intense competition in the lucrative AI space.

Both Alphabet and Microsoft are ramping up investments in AI and other key areas.

Alphabet’s capital expenditure jumped to $12 billion this quarter, exceeding forecasts and setting the pace for at least $48 billion in spending this year, a near 50% increase from 2023.

Similarly, Microsoft’s capital expenditures rose to $14 billion, reflecting their own focus on growth initiatives.

Beyond the headline figures, Alphabet’s financial performance has impressed analysts with a significant improvement in operating margin.

CFO Ruth Porat attributed this positive shift to the company’s “ongoing efforts to durably re-engineer our cost base.”

Google’s core advertising business remains a powerhouse with revenue from search and YouTube, representing over 75% of their income.

Based on its latest financials, this income has grown by a healthy 13% to reach $61.7 billion, outperforming expectations of $60.2 billion, to further demonstrate a continued strength in these key areas.

Alphabet’s strong financials, first-ever dividend, and AI focus signal a bright future where investors win more with a new dividend program to solidify its tech sector leadership.

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