- Revenue and earnings beat Street estimates
- Strongest revenue growth in two years
- First ever dividend announced
Shares in Alphabet (GOOG:NASDAQ) are set to open at a new all-time high after the Google parent reported strong double-digit first quarter revenue growth, and bested Wall Street profit estimates. The internet search giant also announced it would pay its first ever dividend.
Pre-market data has the shares surging 12% to $176, taking year to date gains to 25% and pushing the company’s market cap beyond $2 trillion.
The business recorded its fastest top line growth in two years as revenue jumped 15% to $80.54 billion compared with consensus expectations of $78.59 billion according to Refinitiv data.
The company beat Street estimates in both advertising and cloud revenue with the former making up around 80% of total revenue. Earnings per share came in at $1.89, smashing consensus forecasts of $1.51.
In a statement CEO Sundar Pichai said: ‘Our results in the first quarter reflect strong performance from Search, YouTube and Cloud.
‘Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation.
Pichai believes the company has identified a clear path to monetise AI through advertising, cloud and subscriptions.
DEBUT DIVIDEND
Stocking investor excitement Alphabet announced its first dividend of $0.2 per share and an additional $70 billion stock repurchase programme. The company closed the quarter with cash and equivalents of $108 billion compared with $110.9 billion a year ago.
Investment director Russ Mould at AJ Bell commented: ‘Alphabet joining the ranks of tech companies paying dividends is a sign of the times.
‘Big tech firms have enjoyed stellar growth over the past decade and while most remain highly innovative, their cash flows have become so strong that there’s oodles of money left over post-reinvestment in the business to reward shareholders.
‘It’s not that they’ve been tight on cash before, it’s just that previously share buybacks were seen as the preferred way to deploy surplus money.
‘The yields on offer from Alphabet and Meta are minuscule but the pace of dividend growth could be the key attraction for income hunters.’
Disclaimer: Financial services company AJ Bell referenced in the article owns Shares magazine. The author of the article (Martin Gamble) and the editor (Steven Frazer) own shares in AJ Bell.
