The Zhitong Finance App learned that on Friday morning Beijing time, Google's parent company Alphabet (GOOGL.US) announced its first quarter results. According to the data, the company's Q1 revenue was US$80.54 billion, up 15% year over year, better than market expectations; earnings per share were US$1.89, which was also better than market expectations.

The company also said it would pay a dividend of 20 cents per share for the first time and buy back an additional $70 billion in shares. The stock rose more than 16% after the market.

According to information, investors have responded positively to major technology companies' moves to buy back shares and pay dividends. In February of this year, Meta Platforms (META.US) announced its first dividend payment, which boosted the stock price by more than 14%. Notably, Amazon (AMZN.US) has never paid dividends, nor authorized share repurchases close to Google's size. Amazon's largest share buyback took place in 2022, amounting to $10 billion.

Bet on artificial intelligence

Like other big tech companies, Alphabet has been investing money to develop artificial intelligence, a strategy that has helped drive demand for its cloud services. Alphabet's cloud revenue increased 28% in the first quarter. Alphabet lags behind Amazon and Microsoft (MSFT.US) in the cloud computing market, but the company's strength in the field of artificial intelligence may help close the gap.

“Most importantly, we're excited about the benefits artificial intelligence brings to our cloud customers,” Alphabet's chief financial officer Ruth Porat said during the conference call. “We are seeing the growing contribution of artificial intelligence solutions.”

Many of the basic technologies used in today's AI boom were developed by Google and incorporated into products from search engines to Gmail and Google Docs.

However, the advent of artificial intelligence robots such as OpenAI's ChatGPT poses a threat to Google's 20-year monopoly in the search field. The company is trying to compete in the field of generative artificial intelligence without encroaching on its core profit machine.

Google formed a company-wide team to reaffirm its leading position in the field of artificial intelligence, but the company made early mistakes, including the scandal of the AI model Gemini dealing with race issues.

Investors are excited about the future of artificial intelligence, but they want tech companies to continue to focus on revenue and profits in the meantime. Meta, which competes with Google in the field of artificial intelligence and digital advertising, experienced the worst stock price drop since October 2022, after the company reported that it would invest several billion dollars more in artificial intelligence this year and expected a decline in revenue this quarter.

Google said capital expenditure for the first quarter was $12 billion, mainly investments in technical infrastructure such as servers and data centers. Porat said she expects quarterly capital expenditure to be at or above this level throughout the year.

Developing tools for generative artificial intelligence is very expensive, but Alphabet CEO Sundar Pichai said he is “very, very confident” in managing these costs. Despite questions about how Alphabet can monetize its artificial intelligence, Pichai said he is “relieved and confident that the company can manage the monetization transformation well.”

Businesses such as search ads performed well

Unlike Meta, Google's latest earnings report shows that digital advertising continues to drive the company's growth thanks to search engines and YouTube. Search ad revenue grew 14% to $46.2 billion, and remains Google's lucrative core business.

Emarketer analyst Evelyn Mitchell-Wolf said, “Google's core search business is also performing well, but its future is uncertain.” “The US Department of Justice's related antitrust trial is expected to be decided next quarter, and incorporating components generated by artificial intelligence into Google's main search interface is arguably the biggest change in the search advertising market since its inception.”

If consumers switch from Google searches to a new wave of chatbots, it could jeopardize the company's search advertising dominance. It is estimated that Google's search advertising business will bring in nearly 200 billion US dollars in revenue this year, and is also the source of most of Alphabet's profits.

Cloud computing has been a highlight of Google since it began making profits early last year. Many young artificial intelligence startups have been founded by former Google employees, which has created a strong channel for cloud customers.

Google Cloud had sales of $9.6 billion. The division's profit of $900 million was well above analysts' expectations of $672.4 million.

“Over the years, Google Cloud has generally been a weak link,” said Lee Sustar, chief analyst at Forrester. “These latest results show that Google Cloud's artificial intelligence products have not only been re-examined by enterprise customers, but have also cost a lot of money.” Sustar added that Google Cloud has proven that it itself is a powerful division and doesn't have to rely on the tech giant's advertising revenue to cover operating losses as it has in the past few years.

The popular video site YouTube had revenue of $8.1 billion, while analysts' average expectations were $7.7 billion. The division returned to normal last quarter after a series of disappointing results.

“YouTube, in particular, appears to have benefited from investment in live sports, ad blocking attacks, and improvements in the monetization of the short video platform Shorts, which has achieved the strongest growth rate in two years,” Mitchell-Wolf said.

Alphabet's “Other Bets” (Other Bets) division includes various emerging businesses including the autonomous vehicle Waymo and life science company Verily. The division had revenue of $495 million while losing $1 billion. Investors have been keeping a close eye on this unprofitable sector for years. Earlier this year, the company's famous “Moon Landing Program” Factory X laid off dozens of jobs and instead focused on spin-off the company.

In order to free up resources to invest in artificial intelligence, Google has carried out round after round of layoffs, involving teams such as hardware, engineering, and Moon Landing Labs x. Google reports that the company has a total of 180,895 employees, down from 190,711 in the same period last year.