Alphabet, the parent company of Google, delivered stronger-than-expected first-quarter earnings on Thursday, reporting a 12% year-on-year rise in revenue to $90.2 billion and a 46% jump in net income to $34.5 billion. The results were bolstered by the continued strength of its search and advertising business and growing demand for its cloud computing services, particularly those tied to artificial intelligence, the Financial Times reported.
The upbeat report, which calmed investor concerns about the impact of rising tariffs and a potential US recession, pushed Alphabet shares up more than 4% in after-hours trading. The company also announced a $70 billion share buyback, matching last year’s repurchase level.
Search and AI continue to drive growth
Google’s core search and advertising division remained the bedrock of Alphabet’s performance, generating $50.7 billion in revenue—nearly 10% growth over the previous year and above analyst expectations. Despite rising competition from generative AI tools like OpenAI’s ChatGPT, Anthropic’s Claude, and Elon Musk’s Grok, Alphabet showed that its core business remains resilient.
Sundar Pichai, Alphabet’s chief executive, attributed the strong results to “continued strong growth” in search and increasing user engagement with its new AI features. “Features like AI Overviews are seeing encouraging traction, and we’re expanding them globally,” Pichai said. AI Overviews, which generate automated summaries at the top of search results, have raised concerns about reduced ad clicks, but the company downplayed any negative impact.
Chief business officer Philipp Schindler said that monetisation levels for AI Overviews were “approximately the same” as those for traditional search links, though he declined to provide specific click-through rates.
Cloud revenue rises, but growth pace slows
Alphabet’s cloud computing division posted a 28% jump in revenue to $12.3 billion, reflecting sustained demand for data centre services amid the AI boom. However, the growth was slightly slower than the 30.1% reported in the prior quarter. Alphabet said the moderation was due to capacity constraints, with demand outpacing supply as it ramps up new data centres.
Capital expenditure soared to $17.2 billion in the quarter—up from $12 billion a year ago—as Alphabet continues its record investment in AI infrastructure, including chips and networking equipment. The company now forecasts full-year capex will hit $75 billion, up from $53 billion in 2024, contributing to the tech sector’s projected $300 billion in infrastructure spending this year.
Tariffs and trade friction pose risks
Despite the strong results, Alphabet acknowledged headwinds from US President Donald Trump’s ongoing trade war, particularly new US tariffs on small packages that were previously duty-exempt. The policy shift has prompted Chinese e-commerce giants like Temu and Shein to slash ad spending on platforms including Google and Meta.
Schindler said the change “will cause a slight headwind to our ads business in 2025, primarily from Asian-based retailers.” Alphabet is the second major US tech firm to report earnings following Trump’s recent trade actions, with Tesla earlier warning that tariffs would significantly impact its battery operations reliant on Chinese imports.
Alphabet shares have declined around 17% year-to-date, largely on fears about global trade disruptions and consumer pullbacks.
One-off gains and legal overhangs
The company’s net income also received a boost from an $8 billion one-time gain tied to an undisclosed private equity holding. While this helped lift earnings, Alphabet continues to face pressure on the regulatory front. It has lost several antitrust cases brought by US authorities concerning its dominance in search, digital advertising, and app distribution.
Potential consequences include the forced divestiture of the Chrome browser, termination of its exclusive search deal with Apple, and increased data-sharing obligations with smaller rivals.
Investor optimism returns—for now
Despite these concerns, Thursday’s results reassured markets that Alphabet remains a dominant force in tech, navigating macroeconomic turbulence and emerging AI challenges. Jefferies analyst Brent Thill summed it up as “better than feared,” noting that healthy advertising and cloud revenues provided much-needed stability amid uncertain times.
Alphabet’s performance signals that, at least for now, AI innovation and traditional search can coexist—and thrive—even as the broader economic and regulatory landscape becomes increasingly volatile.
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