TLDR
- Alphabet reported Q1 EPS of $2.81 vs $2.01 expected, with revenue reaching $90.23 billion
- Google Cloud revenue grew 28% year-over-year to $12.26 billion with operating income up 142%
- Operating profit margins improved across all segments to 33.9% from 31.6% a year ago
- Company announced $70 billion share repurchase authorization and 5% dividend increase
- Stock rose approximately 5.5% in premarket trading following the Thursday earnings release
Alphabet, the parent company of Google, released its first-quarter earnings report late Thursday, showing results that exceeded Wall Street expectations. The tech giant’s stock jumped about 5.5% in premarket trading Friday following the announcement.
The company reported earnings per share of $2.81, well above analysts’ consensus estimate of $2.01. This represents a substantial increase from the $1.89 per share reported in the same period last year.
Revenue for the quarter reached $90.23 billion, surpassing expectations of $89.17 billion. This marks a 12% increase compared to the previous year.
Strong Performance Across Key Business Areas
Google’s advertising business continued to be a major revenue driver. Ad revenue topped $66.8 billion versus expectations of $66.4 billion.
The revenue beat was built on the company’s performance in Search ads, its third-party ad network, and through other services like the Google Play store and YouTube subscriptions.
Google Cloud Platform performed well, with revenue growing 28% year-over-year to $12.26 billion. This was just $5 million short of analyst expectations.
Profitability in the Cloud segment showed major improvement. Operating income in this division increased by an impressive 142% compared to the same period last year.
Alphabet saw improved operating profit margins across all its main segments. The company-wide margin rose to 33.9% from 31.6% a year ago.
Capital Returns and Future Investments
In a move that pleased investors, Alphabet announced a new share repurchase authorization of $70 billion. At the current run rate, this represents about five quarters worth of buybacks.
The company also increased its dividend by 5%, providing additional returns to shareholders.
Despite these shareholder returns, Alphabet continues to invest heavily in its future. The company projects capital expenditures of $75 billion for 2025, consistent with its previous outlook.
First-quarter capital expenditures were slightly above the guided $17 billion, representing a 43% increase year-over-year. Even with this spending increase, Alphabet still delivered $19 billion in free cash flow, up 13% from last year.
The rising capital expenditures are reflected in depreciation expenses, which rose 31% on the year. Chief Financial Officer Anat Ashkenazi indicated that Alphabet will look for cost savings to offset these expenses.
Waymo Shows Promise for Future Growth
One of the more promising future sources of revenue is Google’s robotaxi service, Waymo. CEO Sundar Pichai revealed that Waymo was serving a quarter of a million passengers per week, up five times from a year ago.
Pichai mentioned that management is still working to determine the optimal business model for this rapidly growing service.
“We’re pleased with our strong Q1 results, which reflect healthy growth and momentum across the business,” Pichai said. “Underpinning this growth is our unique full stack approach to AI.”
Challenges on the Horizon
Alphabet faces several external challenges that weren’t directly addressed during the earnings call. The company is dealing with two antitrust suits with the Department of Justice, both decided in the government’s favor.
The first case is currently in trial to determine penalties, with the government seeking measures like requiring Google to share its search and ad indexes with competitors, or potentially even breaking up the company.
Last week, a US federal judge found that Google holds an illegal monopoly over the online advertising market, which could force it to sell off or reorganize its ads business.
Recent fines for Apple and Meta Platforms indicate that the European Commission is strictly enforcing its Digital Markets Act and Digital Services Act, both of which are likely to affect Alphabet.
First-quarter general and administrative expenses were up 17% from last year due to the “impact of charges for legal and other matters,” according to CFO Ashkenazi.
Google is among the first Big Tech companies to report earnings since President Trump’s “Liberation Day” tariff plan raised concerns about a possible economic recession. Barclays analyst Ross Sandler noted, “We have seen some transaction velocity in e-commerce drop off of late, and given the macro noise, would expect digital ads to weaken in 2Q.”
Despite these challenges, Alphabet’s strong first-quarter performance demonstrates the company’s ability to maintain growth and profitability in a complex business environment.
