Google parent Alphabet Inc. reported first-quarter revenue and profit that exceeded analysts’ expectations, buoyed by continued strength in its search advertising business.
First-quarter sales, excluding partner payouts, were US$76.5 billion, the company said Thursday in a statement. Analysts had expected $75.4 billion on average, according to data compiled by Bloomberg. Net income was $2.81 per share, compared with Wall Street’s estimate of $2.01.
The shares, which have declined 16 per cent so far this year, rose more than 3.5 per cent in extended trading following the report.
Alphabet needs to ensure momentum in its internet search advertising and cloud businesses in order to justify its heightened investment in the artificial intelligence race. Competition is prompting the company and its rivals to spend heavily on infrastructure, research and talent. While Google benefits from AI startups spending on its cloud and business tools, it’s also racing to present an answer to popular conversational AI chatbots, which consumers are beginning to think of as an alternative to using Google Search.
Google’s beginning of the answer to that threat — its “AI Overviews” and “AI Mode” in search, in which summarized responses are drafted by generative AI and highlighted ahead of Google’s web links — have seen mixed success. Meanwhile, Google’s AI changes to search have decimated traffic to independent websites across the open web.
Google Cloud brought in operating profit of $2.18 billion, beating analysts’ estimates for $1.94 billion despite slightly missing expectations on sales. The results indicate that Google may be ekeing out more profits from Cloud even as sales slow.
The cloud unit is so far the clearest indicator of how the AI boom is contributing to the company’s sales, as startups that require more computing power for their work become customers. Though Google Cloud still lags in third place behind Amazon.com Inc. and Microsoft Corp.’s offerings, it’s one of Alphabet’s most important growth areas.
Alphabet remains heavily invested in AI. Capital expenditures were $17.2 billion in the first quarter, slightly higher than analysts’ expectations for $17.1 billion.
Davey Alba, Bloomberg News
