Alphabet, the parent company of Google, has kicked off the year with a solid first-quarter earnings result, showing the strength of its core advertising business while continuing to invest heavily in artificial intelligence (AI) and cloud services.
The tech giant reported revenue of USD 76.5 billion for the quarter (excluding payments to partners), a 13% increase on the same period last year and ahead of market expectations. Profit also came in well above forecasts, with earnings per share reaching USD 2.81 versus the anticipated USD 2.01. This strong result helped lift Alphabet’s share price by more than 5% in after-hours trading.
The main driver behind this performance was Google’s search advertising business, which remains the company’s biggest revenue generator. Search ads pulled in USD 50.7 billion, showing resilience despite growing competition from AI-based alternatives like ChatGPT. While Google continues to see healthy demand from industries such as insurance, healthcare, retail, and travel, there are signs that the rapid growth of search may start to slow, with expectations for growth to moderate from double digits to high-single digits in the next quarter.
YouTube also played its part, delivering USD 8.92 billion in ad revenue, roughly in line with forecasts. Although advertising remains the core for YouTube, its subscription services continue to grow steadily, seemingly insulated from broader economic concerns.
Google Cloud remains a key growth engine for Alphabet, generating USD 12.26 billion in revenue — a rise of 28% year-on-year. More importantly, the cloud division posted an operating profit of USD 2.18 billion, reflecting improved efficiency even as sales slightly missed expectations. Demand for cloud services, particularly from AI startups needing significant computing power, continues to outpace Google’s data centre capacity.
However, Alphabet’s push into AI hasn’t been without its challenges. The company’s AI-powered search features like “AI Overviews” have received mixed feedback, and the broader shift toward AI-based search tools presents a risk to its traditional advertising dominance.
Despite these competitive pressures, Alphabet remains committed to investing in its future. The company spent USD 17.2 billion on capital expenditure during the quarter, primarily on servers and data centres, and announced a 5% increase to its dividend along with a massive USD 70 billion share buyback.
While Google’s dominance in search is being tested by the rise of generative AI, this quarter’s results show that its core business remains strong — at least for now. For mum and dad investors, Alphabet’s steady profitability, combined with its strategic push into AI and cloud, suggests the company is positioning itself well for the next phase of digital evolution.
