Google parent Alphabet announces its first-ever dividend, shares soar to nearly 16%

NEW DELHI: Google 's parent company Alphabet on Thursday announced its first-ever dividend and a $70 billion stock buyback , leading to the stock surge of nearly 16% after the bell. The dividend will be 20 cents per share.

Alphabet is returning capital while spending billions of dollars on data centres to compete with rivals on generative artificial intelligence (AI).

Alphabet's Big Tech rival, Meta Platforms , three months ago, announced its own first-ever dividend, a move that spiralled the social media company's stock market value by $196 billion the following day.

Amazon.com remains the lone holdout among Big Tech firms not offering a dividend.

Alphabet beat expectations for the quarter in sales, profit and advertising - metrics that are all closely watched.

"Alphabet's announced dividend payouts and buybacks on top of the solid earnings beat are not only a breath of fresh air for the tech market as a whole, but also a very intelligent strategy for the search engine giant going into a tough time of the year," said Thomas Monteiro, senior analyst at Investing.com.

Alphabet's after-hours share surge of nearly 16% following the report increased its stock market value by about $300 billion to over $2 trillion.

In a call to discuss results, CEO Sundar Pichai touted Google's AI offerings as a boon to its core search results. "We are encouraged that we are seeing an increase in search usage among people who are using the AI overviews," he said.

Revenue was $80.54 billion for the quarter ended March 31, compared with estimates of $78.59 billion, according to LSEG data.

The search firm exceeded expectations for first-quarter revenue due to increased demand for its cloud services driven by the growing use of artificial intelligence and consistent advertising expenditure.

Google stated that advertising increased by 13% in the quarter to $61.7 billion. This amount is compared to the average estimate of $60.2 billion, as per LSEG data.

Alphabet had a disappointing fourth quarter where advertising sales fell short, leading to a drop in share prices, due to increased competition from companies such as Facebook and emerging platforms like TikTok.

TikTok is uncertain about its future following US President Joe Biden 's approval of a bill that could result in a ban on the app if it is not sold within the next nine to 12 months.

Meanwhile, revenue from Google Cloud increased by 28% in the initial quarter, driven by a surge in generative artificial intelligence tools that depend on cloud services to provide the technology to clients.

Google's cloud services are appealing to startups backed by venture capital that are working on generative AI technologies because of the pricing and seamless integration with other tools, as mentioned by investors and experts in the past.

(With Reuters inputs)