Small figurines using computers and smartphones are pictured in front of the Alphabet logo in this image taken on February 19, 2024. (REUTERS/Dado Ruvic/Illustration)
Alphabet, the parent company of Google, saw its shares rise nearly 4% on Friday after it posted strong quarterly results. Investors were reassured that Alphabet’s major investments in artificial intelligence are paying off, particularly by boosting its core advertising business. This eased recent worries about rising competition and the impact of new trade tariffs.
In the first quarter, Google’s ad revenue grew by an impressive 8.5%, beating Wall Street expectations. This came as a relief to many, especially since there had been growing concern that a slowdown in U.S. ad spending, fuelled by global trade tensions, could damage the digital advertising industry.
Earlier this month, reports showed that major advertisers like Temu and Shein had cut back sharply on their U.S. digital ad spending, sparking fears across the sector. Meanwhile, news that Amazon and Microsoft were scaling back on some cloud computing projects added to the anxiety. Many feared that big tech companies might have overcommitted to AI investments, only to now face economic uncertainty and tighter budgets.
However, Alphabet’s latest results have provided a bright spot. Deutsche Bank analyst Benjamin Black pointed out that Alphabet showed strong growth across all major business areas, despite facing negative sentiment, regulatory hurdles, and market worries.
While Google did mention that the Trump administration’s recent changes in trade policy could slightly affect its ad business this year, company executives did not raise any serious alarms about a broader slowdown in advertising.
Alphabet’s positive report also lifted other tech stocks on Friday. Shares of Meta Platforms, which owns Instagram, rose 2%. Pinterest climbed 1%, and Snap, the parent company of Snapchat, gained about 3%.
Adding to the good news, Alphabet announced a massive $70 billion share buyback. It also shared that its AI Overviews feature — which gives users quick summaries above traditional search links — has already attracted 1.5 billion monthly users within just a year of its launch.
Analysts remain optimistic about Google’s competitive position in the AI race. BofA Global Research noted that Google’s huge user base and access to data give it an edge over rivals like Openai and Perplexity. They believe Google has closed much of the performance gap compared to these newer players.
Even so, Alphabet's stock remains down around 16% this year, compared to declines of about 8% for Microsoft and 9% for Meta. Its price-to-earnings ratio over the next year is 17.33, still lower than Microsoft's 26.56 and Meta's 20.49.
Bernstein analyst Mark Shmulik summed up the market's reaction by saying, "Perhaps Dr. Google is just what this market needed — a healthy dose of strong fundamental performance."
