Alphabet’s stock rose by 1.7% on Friday, fueled by strong growth in its search and advertising sectors, even amid a competitive artificial intelligence landscape and ongoing macroeconomic uncertainty. Analysts, such as Brian Nowak from Morgan Stanley, noted that Alphabet’s pace in rolling out its Generative AI products is accelerating, with several positive signals pointing to future growth. Despite the broader uncertainty, Nowak maintained an optimistic outlook, citing Alphabet’s strong market position and the rapid expansion of its AI-driven offerings.
Alphabet reported earnings of $2.81 per share, on revenue of $90.23 billion, surpassing both Wall Street expectations of $89.12 billion in sales and $2.01 in earnings per share. Revenue grew by 12% year-over-year, outpacing the anticipated 10% growth. The company’s net income also saw a significant jump, rising 46% to $34.54 billion, or $2.81 per share, compared to $23.66 billion, or $1.89 per share, during the same period last year. However, this figure was influenced by $8 billion in unrealized gains from Alphabet’s investments in nonmarketable equity securities linked to a private company.
Excluding this gain, Alphabet’s adjusted earnings were $2.27 per share, beating analyst expectations. Despite this positive performance, the company’s stock has struggled this year, falling more than 14%, partly due to concerns about trade wars and potential tariffs. There are also fears that these global economic issues could hamper Alphabet’s ability to expand its data center infrastructure, which is vital for running the AI models that are crucial to its future growth.
Alphabet’s advertising business remained robust, generating $66.89 billion in revenue, which was an 8.5% increase from the previous year. The company’s YouTube revenue came in at $8.93 billion, slightly missing the forecasted $8.97 billion. The search and other unit, which includes Google Search, brought in $50.7 billion, a 9.8% increase from last year. A standout feature was the AI Overviews tool integrated into Google Search, which now has 1.5 billion monthly users, up from 1 billion in October.
Analysts, such as Justin Post from Bank of America, believe Wall Street is underestimating the potential for growth from Alphabet’s AI tools and cloud services, both of which are expected to gain momentum as AI technology evolves. Overall, the strong first-quarter performance, alongside positive developments in AI, could ease investor concerns regarding Alphabet’s competitiveness in the AI space.
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