Why Alphabet Stock Was Soaring Today

The search giant turned a strong first-quarter earnings report and initiated a dividend.

Shares of Alphabet (GOOG 9.93%) (GOOGL 10.22%) were jumping double digits today after the Google parent breezed past Wall Street estimates in its first-quarter earnings report and declared a dividend for the first time in its history.

As a result, the stock was up 10.1% as of 12:45 p.m. ET, and its market cap topped $2 trillion for the first time.

A man clicking on a search bar.

Image source: Getty Images.

Alphabet dazzles investors in Q1

Alphabet continued to rebound from the digital advertising lull in 2022 and 2023 as revenue rose 15% in the quarter to $80.5 billion, easily beating estimates at $78.6 billion.

Growth was broad based as Google advertising revenue, which includes search, YouTube, and its third-party network ads, increased 13% to $61.7 billion, while Google Cloud revenue jumped 28% to $9.6 billion.

Layoffs and other cost-cutting moves over the last year drove a significant improvement in margins as its operating margin expanded from 25% to 32%. That and a surge in other income from its unrealized gains in equity investments led to earnings per share jumping 62% to $1.89, which topped the consensus at $1.51.

CEO Sundar Pichai talked up the company’s prospects in AI, saying, “We are well underway with our Gemini era and there’s great momentum across the company. Our leadership in AI research and infrastructure, and our global product footprint, position us well for the next wave of AI innovation.”

Separately, the company also announced a new dividend program, saying it would start paying a quarterly dividend of $0.20 a share in June. That will give investors a modest yield of about 0.5%, but it’s a big step for a company that has been incapable of paying a dividend for a long time. The move will also reward longtime shareholders of the stock.

Finally, Alphabet added $70 billion to its share-buyback authorization, reinforcing the primary way it’s returned capital to shareholders.

Why investors loved the report

Wall Street roundly cheered the update, and it’s easy to see why. The results were virtually flawless with a strong performance in all its key business segments. The company easily beat estimates, and the dividend was sure to be a crowd-pleaser.

While investors shouldn’t get used to double-digit earnings jumps from a company this big, the stock still looks like a good value for its expected growth, especially if the ad market continues to recover. It looks like a good bet to continue gaining over the long term.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

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