Google parent Alphabet’s blockbuster earnings report Thursday sent its stock price surging in limited afternoon trading, setting up the search engine giant to achieve a historic milestone.
Google CEO Sundar Pichai appears in February at an AI event.
AFP via Getty Images
Key Takeaways
- Alphabet shares soared more than 12% after Thursday’s market close, indicating the company’s market capitalization will jump by more than $200 billion to about $2.2 trillion when normal trading resumes Friday, setting the company up for its first-ever $2 trillion valuation.
- The massive surge came after Alphabet delivered a first-quarter earnings report well above expectations: Its $80.5 billion in revenue and $1.89 earnings per share were well above respective analyst estimates of $78.8 billion and $1.51, according to FactSet.
- That’s the company’s best-ever quarterly profit thanks to the whopping 62% year-over-year growth, with overall net income climbing to nearly $24 billion.
- Alphabet is on track to join Microsoft, Apple and Nvidia as the only other companies in the world valued at over $2 trillion.
Tangent
The company announced its first-ever cash dividend Thursday, which, at about $0.20 per share at an after-hours share price of about $175, indicates a modest 0.5% dividend yield. It does indicate Google’s maturity as a company, as dividends directly reward shareholders of a company’s profits. Rival Meta paid out its first-ever dividend earlier this year.
Surprising Fact
The massive earnings expansion came as Alphabet trimmed its headcount from 191,000 during 2023’s first quarter to 181,000 last quarter.
Key Background
The final quarter of 2023 was Alphabet’s best quarter ever by profits and sales in its history. Though Google’s revenue moderated in 2024’s opening stretch from that historic run, it should come as no surprise, as the fourth quarter has been Google’s highest-grossing quarter during each of its 20 years as a public company, according to FactSet data.
Alphabet is a massive conglomerate, but it’s an advertising business at its very core, with ads accounting for more than 75% of all revenues. That’s still a smaller share than its closest ads-focused competitor in big tech, Facebook parent Meta, which relies on ads for about 99% of its total sales. Up about 13% this year, Alphabet shares touched a new all-time high earlier this month, flirting with a $2 trillion valuation for the first time ever.
Tangent
Google stock’s strong returns come even as users and investors react fairly coldly to its Gemini generative artificial intelligence program, with the company notoriously shedding some $90 billion in market value on one fateful February day after Google admitted it “missed the mark” and pulled Gemini’s image-generating service offline.
Still, Google has maintained its dominance in online search market share despite Microsoft’s Bing’s earlier integration of generative AI, and Gemini has yet to make a prominent mark on Alphabet’s income statement, though CEO Sundar Pichai declared 2024 the early days of “the Gemini era.”
