Alphabet, Google’s Parent Company, back in $2 Trillion Valuation
The company’s AI efforts is key to its accelerated growth in 2024.
On Friday, April 26th, 2024, Alphabet’s stock market value grew by approximately $300 billion, a surge of nearly 10% which caused the company’s market valuation to finally surpass the $2 trillion mark for the first time since November 2021.
The stock surge was also the highest experienced since the remarkable 16% stock market jump in July 2015. Google’s parent company reclaiming a spot in the $2 trillion valuation club indicates the company’s efforts to accelerate growth in 2024.
Q1 2024 Earnings
Friday's stock market surge of Alphabet was heavily influenced by the company announcing its 2024 first-quarter results. The results turned out to be better than every analyst’s prediction. The company reported revenue of $80.54 billion in Q1. The earnings are a 15% increase from the same period last year and mark the fastest growth rate experienced by Alphabet since 2022. The London Stock Exchange Group (LSEG) had predicted $78.59 billion in revenue for the company instead.
The earnings per share for Alphabet’s stock had been forecasted at $1.51, but the company reported $1.89 instead for the quarter ending in March. Thanks to the collection of higher revenue, Alphabet recorded a 29% profit margin in the first quarter of 2024. This margin was a commendable rise from 2023’s first-quarter profit margin of 22%. Regarding net income, Alphabet reported $23.7b made in the first quarter of 2024, which was a 57% increase compared to the same period in the previous year.
To celebrate this incredible performance, Alphabet’s board approved the payment of dividends to investors for the first time. The company also shared that moving forward the intention is to pay investors quarterly cash dividends subject to review and approval by the company’s Board of Directors. This move comes in the wake of tech giant Meta’s announcement in February to issue dividends for the first time as well.
For this first dividend payment, Alphabet’s investors will receive 20 cents per share on each class A, class B, and class C shares on June 17, and the payments will be made to all shareholders on record as of June 10. Furthermore, the company will repurchase an additional $70 billion in class A and class C shares after the board approves this move, citing it is in the best interest of the stockholders and the company. Meta also approved the buyback of $50 billion worth of its shares.
Emmanuel Oyedeji
Sundar Pichai, Alphabet’s chief executive, attributed the impressive first quarter results to the strong performance of traffic acquisition, YouTube, and cloud services. The company made $8.09 billion in revenue from YouTube advertising, while Wall Street had predicted revenue of $7.72 billion. Google Cloud services brought in revenue of $9.57 billion, which was close to the expected $9.35 billion. Additionally, Traffic Acquisition Cost (TAC) totaled up to $12.95 billion in revenue, while StreetAccount had predicted $12.74 billion instead.
Conversely, Google single-handedly brought in $61.66 billion in revenue from advertisement sales only. This was a significant growth from last year’s revenue of $54.55 billion in the same period. This rise in sales indicates a stabilization of Google’s advertising avenue, which is the business’s core revenue earner after struggling in 2022 and 2023.
Google expects the upward trajectory in ad sales to continue as inflation and interest rates stabilize and brands become more confident in their spending, specifically on advertisements. On the other hand, Google subscriptions, platforms, and devices brought in revenue, adding up to $8.74 billion compared to the $7.41 billion made in the same quarter last year.
The AI Boost
While Mr. Pichai credited the avenues mentioned above for contributing heavily to the company’s first-quarter revenue, he also acknowledged that a sizeable part of Google’s revenue gains resulted from the company’s investment in AI. Gone are the days when we only used Google to search for information such as cooking recipes, no deposit bonus casino sites, and the latest news. Today, thanks to the integration of Artificial Intelligence features and tools on Google, most people use the platform to improve their productivity and efficiency.
Google has invested in AI-powered, work-focused features that are available to clients who use Google Workspace. The features include an increase in the number of languages viable for automatic transcription on Google Meet, the Help me Write feature on Gmail that allows users to prompt AI to write an email, and the instant polish tool that rewrites notes in drafts into comprehensive emails as well as automated options for arranging information keyed in Docs and Sheets. Alphabet's chief executive shared that there has been a significant increase in Google searches using AI overviews.
As he wrapped up the release of Alphabet’s Q1 earnings report, Mr. Pichai affirmed that the company’s leadership in AI research and infrastructure, combined with its global product footprint, positioned it very well for the next wave of AI innovation. Alphabet’s stock was trading up 11.7% at $173.55 at the latest, with its market valuation capping at $2.19 trillion.
