Alphabet (i.e. Google's Parent Company) Surges by 16% after Announcing Dividend and $US70 billion Buyback

[JohnS]

Alphabet Surges by 16% after Announcing Dividend and $US70B Buyback

"Alphabet's announced dividend payouts and buybacks on top of the solid earnings beat are not only a breath of fresh air for the tech market as a whole, but also a very intelligent strategy for the search engine giant going into a tough time of the year," said Thomas Monteiro, senior analyst at Investing.com. Posted on Apr 26, 2024

Google’s parent company, Alphabet announced its first-ever dividend on Thursday along with a $70 billion stock buyback, prompting investors to send the stock surging nearly 16% after the closing bell. Alphabet is returning capital while spending billions of dollars on data centers to catch up with rivals on generative artificial intelligence.

(Image Credit: Google)

Just three months ago, Alphabet’s Big Tech rival, Meta Platforms, announced its own first-ever dividend, a move that lifted the social media company’s stock market value by $196 billion the following day. Amazon.com remains the lone holdout among Big Tech firms not offering a dividend.

Alphabet announces dividend and stock buy back

Alphabet said it’s issuing a 20 cent per share dividend, the company’s first ever, and that its board authorized the up to $70 billion in stock buyback. The news was announced alongside better-than-expected first-quarter earnings.

The dividend is payable to all class of shares, including super-voting Class B shareholders, as well as nonvoting Class C shareholders. Most Google investors own the company through Class A shares. All shareholders of record as of June 10 will receive the dividend the same month.

Co-founder Sergey Brin, who owns more than 730 million Class B and C shares, will receive a $146 million payout. Co-founder Larry Page, who owns 389 million Class B shares, will get a dividend payment of $78 million.

It authorized an identically sized repurchase exactly one year ago, during a period of intense cost-cutting and layoffs.

Alphabet Q1 results

Alphabet beat expectations for the Q1 in sales, profit and advertising metrics that are all closely watched.

“Alphabet’s announced dividend payouts and buybacks on top of the solid earnings beat are not only a breath of fresh air for the tech market as a whole, but also a very intelligent strategy for the search engine giant going into a tough time of the year,” said Thomas Monteiro, senior analyst at Investing.com.

Google’s AI

In a call to discuss results, CEO Sundar Pichai touted Google’s AI offerings as a boon to its core search results.

“We are encouraged that we are seeing an increase in search usage among people who are using the AI overviews,” he said.

Google's Revenue

Revenue was $80.54 billion for the quarter that ended March 31, compared with estimates of $78.59 billion, according to LSEG data.

The search firm’s beat on first-quarter revenue was powered by rising demand for its cloud services on the back of increasing adoption of artificial intelligence and steady advertising spending.

Google reported advertising sales rose 13% in the quarter to $61.7 billion. That compares with the average estimate of $60.2 billion, according to LSEG data.

Rise in Competition

Alphabet is coming off a fourth quarter in which ad sales missed the mark, sending shares tumbling, amid rising competition from Amazon.com, Facebook and new entrants like TikTok. The latter faces an uncertain future after President Joe Biden signed a bill that would ban the popular app if it were not sold within the next nine to 12 months.

Meanwhile, Google Cloud revenue grew 28% in the first quarter, boosted by a boom in generative AI tools that rely on cloud services to deliver the technology to customers.

Alphabet Share

Alphabet’s after-hours share surge of nearly 16% following the report. This increased its stock market value by about $300 billion to more than $2 trillion.

Other Tech Buybacks

Investors have been looking for signs of maturity from technology firms. Every major tech firm announced layoffs and tightened spending beginning in 2022. Investors rewarded those efforts, and have shown a similar reaction to share buybacks and dividend initiations. When Meta announced its first ever dividend in February, it helped send shares soaring more than 14%.

Amazon has never issued a dividend, nor has it ever authorized a share buyback close to the size of Google’s. Amazon’s largest share repurchase, in 2022, was for up to $10 billion.

Amazon will report first-quarter earnings on Tuesday.

Source: https://www.industryleadersmagazine.com/alphabet-surges-by-16-after-announcing-dividend-and-70b-buyback/