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Alphabet’s stock rose after reporting double-digit increases in revenue and profits for the first quarter, driven by another good performance in the search business and a boom in artificial intelligence-related demand for cloud computing.
Revenues rose 12% to $900 billion, while net income rose 46% to $34.5 billion from the same period last year, Google’s parent reported Thursday. Both defeated expectations and eased fears about their ability to survive the trade war and the US recession.
Google’s core search and advertising business rose nearly 10% in the quarter to $50.7 billion, surpassing its 8% to 9% estimate.
The figures have given investors comfort carefully looking at the softness that accounts for 56% of group revenue due to the popularity of AI chatbots such as Openai’s ChatGpt, Anthropic’s Claude and Elon Musk’s Grok.
They are also wary of evidence that answers from Google’s own Gemini chatbot and AI summary cannibalize its core business by reducing the number of user clicks in ads.
“Search has continued to have strong growth, raised by the engagement seen in features such as AI overview,” said CEO Sundar Pichai. “We’re leaning deep here, continuing to expand our capabilities to more users and more questions in a new country.”
Chief Business Officer Philip Schindler declined to specify an accurate user click-through rate, saying that the AI ​​overview and traditional search links are “monetised at roughly the same rate.”
Jeffries analyst Brent Till said the results are “better than what’s feared in healthy advertising and the cloud.” He previously warned that “we will throw hazes into the second and third quarters of macroeconomics and tariffs,” and advertised that Chinese sellers will “facing headwinds” as they cut their spending.
Alphabet’s stock rose more than 4% in aftermarket trading. The company said it would buy back $70 billion in shares, the same amount as last year.
One-time $8 billion profits related to private company stocks did not drive a rise in net profit.
Google is the second largest tech company to report revenues in the wake of US President Donald Trump’s global trade war. Alphabet’s stock fell approximately 17% this year. Like most of its rivals, the company is affected by tariff concerns that disrupt supply chains and mitigates consumer spending, driving the fear of a US recession.
“We are clearly not immune to macro environments,” Schindler said.
This month, the White House sparked duties with a small package. As a result, Chinese e-commerce groups Temu and Shein have reduced spending on digital advertising platforms such as Google and Meta.
Schindler said the policy change would “slightly face the advertising business in 2025, primarily from retailers based in Asia.”
Earlier this week, Tesla warned that tariffs would have a “bold” effect on the battery business, which relies on components from China. Chief Executive Elon Musk has pledged to continue lobbying Trump in support of the principles of free trade.
However, according to Capital IQ, Alphabet’s overall revenues outweigh the expectations of Wall Street Consensus, which is $89.2 billion.
The cloud computing division reported a 28% surge in revenue to $12.3 billion, indicating its ongoing desire for data centers and network services from AI’s Boom. However, this slowed from 30.1% in the last quarter, with demand above supply as Alphabet raced to provide new data centers online.
Record spending on Alphabet’s chips, networking equipment and other AI infrastructure continues to rise, and this year has messed up investors’ concerns about Big Tech’s $300 million spending plan.
Capital expenditures for the first quarter jumped to $17.2 billion, slightly above the $17.1 billion estimate, at $17.2 billion, from $12 billion last year. This is projected to reach $75 billion this year, from $53 billion in 2024.
The company still faces challenges as it lost the antitrust sequence brought by US regulators for search, digital ads and app store business play. You could be forced to sell Chrome browsers, terminate your exclusive search engine partnership with Apple, and share more data with your rivals.
