Article content

Alphabet Inc. reported first-quarter revenue that exceeded analysts’ expectations, buoyed by growth in its cloud computing unit.

The Google parent reported sales, excluding partner payouts, of US$67.6 billion for the three months that ended on March 31, surpassing the US$66.1 billion expected on average by analysts, according to data compiled by Bloomberg. Net income was US$1.89 per share, compared with Wall Street’s estimate of US$1.53 per share.

Article content

The company also said it would pay a dividend of 20 cents a share and repurchase an additional US$70 billion in stock. The shares jumped 14 per cent in extended trading.

Like other Big Tech companies, Alphabet has been plowing money into developing artificial intelligence, a strategy that has helped drive demand for its cloud services, which saw revenue rise 28 per cent in the first quarter. Google is a distant third in the cloud computing market, trailing Inc. and Microsoft Corp., but the company’s prowess in AI could help it close the gap.

Article content

Google has developed much of the underlying technology being used in the AI boom today, and has woven it into products from web search to its suite of enterprise software from Gmail to Google Docs.

Yet ever since OpenAI’s ChatGPT was released in late 2022, Google has been battling the perception that it’s lagging behind Microsoft and OpenAI in rolling out new generative AI tools. The arrival of popular chatbots such as ChatGPT  — which answers questions in a conversational tone rather than providing lists of links to other websites — has posed a threat to Google’s two-decade stranglehold on search. The company is struggling to compete in generative AI without cannibalizing its core profit machine.

Article content

Search advertising revenue rose 14 per cent US$46.2 billion. That compared with the average estimate of US$45 billion.

Google has marshalled teams across the company to reassert its lead in AI, yet its early efforts have been marred by embarrassing blunders, including a scandal over how its AI model Gemini handled race that forced the company to suspend image generation of people.

Investors have shown they are excited about the prospects of AI but want tech companies to continue to focus on revenue and profit in the meantime. Meta Platforms Inc., which competes with Google in AI and also digital advertising, suffered its worst stock decline since October 2022 after reporting that it would spend billions of dollars more this year on AI efforts and projecting weaker revenue for the current quarter.

Search advertising remains the engine of Google’s very lucrative business, and the company is facing heightened competition there, too. Meta has been seeding AI tools throughout its advertising business and Snap Inc. has also undergone a total revamp of its ad business to improve ad targeting. The digital ad market is recovering from a post-pandemic slump, buoyed by the Olympics Games this summer, but Google is increasingly vying for those ad dollars with Meta and Snap.

Recommended from Editorial

If consumers gravitate from Google search to the new wave of chatbots, that could imperil the company’s search advertising juggernaut, which is expected to generate nearly US$200 billion in revenue this year and the bulk of Alphabet’s profit.

Cloud has been a bright spot for Google, after it first became profitable early last year. Many young AI startups are founded by former Google employees, creating a strong pipeline of cloud clients.

Share this article in your social network


By admin