On Thursday, Alphabet, Google’s parent company, reported strong revenue growth in its latest quarter from its search engine and video platform, YouTube, as its market-leading position in online advertising continued to reap rewards despite recent fluctuations in the industry.
Alphabet reported $80.5 billion in quarterly sales, up 15 percent from a year earlier, and above analysts’ estimate of $78.8 billion. Profit climbed 36 percent to $23.7 billion. Analysts had expected $18.9 billion.
Alphabet announced that for the first time, it would give shareholders a dividend of 20 cents per share, to be paid on June 17. The company’s board also approved a $70 billion share repurchase program. Alphabet shares rallied 13 percent in after-hours trading.
The digital advertising industry has ebbed and flowed in the last two years. In 2022, higher inflation and interest rates made advertisers more reluctant to spend, in a blow for Google and its competitors like Meta, the owner of Facebook and Instagram. Google’s search engine has proved most resilient to the fluctuations that have happened since, emphasizing its role as a gateway to the internet for billions of people.
Alphabet continues to print tens of billions of dollars in profit from advertising each year and has been using its funds to bankroll an aggressive push into generative artificial intelligence as part of an escalating race with Microsoft and OpenAI, the maker of the chatbot ChatGPT.
Alphabet said that it spent $12 billion on capital expenditures in the first quarter, soaring 91 percent from a year earlier. Ruth Porat, the company’s chief financial officer, said on a conference call that Alphabet had increased spending on server computers and data centers to deploy A.I. across its business. The company also reported spending $11.9 billion on research and development in the first three months of this year, a 4 percent rise.
In the last year, Google has incorporated A.I. into nearly every facet of its product portfolio — answering some user questions in the search engine, helping content creators make videos on YouTube and suggesting ways to start drafting on Google Docs.
But the company’s A.I. ambitions faced a notable setback in the first quarter. In February, users realized that Google’s Gemini chatbot was creating images of people that were not always historically accurate, depicting U.S. founding fathers and World War II-era German soldiers as multiracial, and women as past popes. It also refused to produce images of white people. Internet users expressed outrage on social media.
Google executives vowed to fix the issue, and have paused the chatbot’s ability to generate images of people in the meantime.
In Thursday’s earnings report, the company gave little indication of whether the chatbot, which has free and paid versions, had taken off as a business. Sundar Pichai, Google’s chief executive, said in a statement that the company was “well underway with our Gemini era.”
To continue paying for Gemini and other A.I. products, Alphabet has tried to cut costs, including by shedding workers. Since the start of the year, it has laid off employees in many of its business units, including YouTube, finance and its core engineering division.
As of March 31, Alphabet had 180,895 employees, slightly down from the 182,502 it had three months earlier, but a drop of nearly 10,000 from a year earlier. At the end of 2019, the company’s work force totaled 119,000, before it went on a hiring spree during the pandemic, when it recorded surging usage of its online services.
In the first quarter, Google’s search and related revenue increased 14 percent to $46.2 billion, above analysts’ estimate of $45 billion.
Advertising sales at YouTube, Google’s video platform, climbed 21 percent to $8 billion, above the $7.7 billion expected by analysts.
Google Cloud, the company’s unit that rents software and computing services to other businesses, reported sales that increased 28 percent to $9.6 billion. Analysts had estimated $9.4 billion.
