Why Alphabet Stock Soared Today

stock alphabet (GOOG 9.93%) (google 10.22%) Google’s parent company jumped to double digits today after blowing past Wall Street estimates in its first-quarter earnings report and declaring a dividend for the first time in its history.

As a result, the stock price rose 10.1% as of 12:45 PM ET, and its market capitalization surpassed $2 trillion for the first time.

Image source: Getty Images.

Alphabet surprised investors in the first quarter.

Alphabet continued to bounce back from its digital advertising lull in 2022 and 2023, with revenue for the quarter up 15% to $80.5 billion, easily beating estimates of $78.6 billion.

Google advertising revenue, including search, YouTube, and third-party network advertising, increased 13% to $61.7 billion, while Google Cloud revenue increased 28% to $9.6 billion.

Margins improved significantly last year, with operating margins expanding from 25% to 32% due to layoffs and other cost-cutting measures. Additionally, earnings per share rose 62% to $1.89, beating the consensus of $1.51, driven by a surge in other income from unrealized gains on equity investments.

CEO Sundar Pichai said the following about the company’s prospects in the AI ​​space: “We are well into the Gemini era and have great momentum across the company. Our leadership in AI research and infrastructure and our global product footprint position us well for the next wave of AI innovation.”

Separately, the company also announced a new dividend program, saying it will begin paying a quarterly dividend of $0.20 per share starting in June. This would give investors a modest yield of about 0.5%, but it’s a big step forward for a company that hasn’t been able to pay a dividend for a long time. The move will also reward long-time shareholders of the stock.

Finally, Alphabet added $70 billion to its share buyback authorization, strengthening its primary method of returning capital to shareholders.

Why Investors Loved This Report

Wall Street welcomed the update with enthusiasm, and it’s easy to see why. The results were virtually flawless, with strong performance across all key business segments. The company easily surpassed expectations, and the dividend was sure to be a crowd pleaser.

While investors shouldn’t get used to double-digit revenue jumps from companies this large, the stock still looks like a good value relative to expected growth, especially if the advertising market continues to recover. Continuing to profit over the long term seems like a good bet.