Alphabet Inc., Google’s parent company, sought to ease concerns among tech investors regarding its artificial intelligence (AI) investments, asserting that these efforts are delivering positive returns in its essential advertising segment, despite ongoing global economic instability.
The company’s financial results for the first quarter exceeded analysts’ forecasts, with both profit and revenue figures outperforming expectations. In an additional boost to investor confidence, Alphabet announced a substantial $70 billion stock buyback plan, leading to a 4% increase in its share price in after-hours trading and adding approximately $75 billion to its market capitalization.
Alphabet reiterated its commitment to ambitious AI development and reaffirmed its capital expenditures guidance of $75 billion for the year. The announcement has offered a glimmer of hope to investors in rival companies like Meta and Amazon, whose stocks also experienced gains in post-market trading.
Concerns about a potential economic downturn spurred by U.S. trade policies under former President Donald Trump have led many businesses to reevaluate their advertising budgets. This situation has also prompted investors to worry that major tech companies may need to pause or reduce their significant investments in AI infrastructure due to increased costs stemming from retaliatory tariffs between the U.S. and China.
While Big Tech firms maintain that their aggressive AI investments are critical for staying competitive, some analysts suggest that there are initial indications that these tech giants may be scale back their commitments to new data centers.
“The prevailing narrative around infrastructure spending has been notably pessimistic, implying that AI investments may have reached a peak and that we could be witnessing the deflation of this bubble. However, what Google communicated today clearly counters that notion,” remarked Will Rhind, CEO of GraniteShares, a global ETF issuer.
Google’s core advertising business, which constitutes nearly three-quarters of its total revenue, experienced an 8.5% increase to $66.89 billion in the latest quarter. Although this marks a decline from the previous quarter’s 10.6% growth rate, it still surpassed analysts’ expectations of a 7.7% increase.
During a conference call, Philipp Schindler, Google’s chief business officer, acknowledged that the company cannot completely shield itself from macroeconomic factors.
“The recent changes to the de minimis exemption will create a minor headwind for our advertising business in 2025, mainly affecting retailers based in the Asia Pacific region,” he stated, referencing a recent order from Trump to eliminate a trade rule that had allowed low-value packages from China and Hong Kong to enter the U.S. without incurring tariffs.
Significant advertisers in the U.S., including prominent Chinese e-commerce platforms Temu and Shein, have sharply reduced their digital advertising budgets, a trend that could negatively impact revenues for both Google and Meta.
Growth in Search Revenue
The incorporation of AI into Google’s search functions is pivotal for enhancing its advertising appeal, providing advertisers with tools to execute more efficient campaigns and optimize their return on investment.
CEO Sundar Pichai highlighted that AI Overviews, which are summaries displayed above traditional hyperlinks to related webpages, now attract 1.5 billion users each month. In March, Google introduced a new AI-exclusive mode for its search engine.
“Despite fears that generative AI platforms, such as ChatGPT, could disrupt the search market, search revenue growth remains robust,” stated David Heger, an analyst at Edward Jones.
Google Cloud reported a 28% increase in revenue, reaching $12.26 billion, though this marked a decrease from the 30.1% growth rate seen in the previous quarter. Analysts had projected revenue of approximately $12.27 billion for the cloud division, according to data compiled by LSEG.
The total revenue for Alphabet during the first quarter amounted to $90.23 billion, surpassing the average analyst estimate of $89.12 billion.
Alphabet’s earnings per share for the January-March period stood at $2.81, significantly above the anticipated $2.01 per share, according to LSEG data. The company also announced a 5% increase in its quarterly dividend to 21 cents per share.
In this quarter, Alphabet’s capital spending reached $17.20 billion, reflecting a substantial 43% rise compared to the same period last year.
© Thomson Reuters 2025
(This story has not been edited by NDTV staff and is auto-generated from a syndicated feed.)
