Google surged after buying back billions of dollars of its own stock

Google surged after buying back billions of dollars of its own stock

Alphabet, the parent company of Google, bounced back from a terrible day for tech stocks, as its shares surged Thursday after the closing bell. All it has to do is hand over billions of dollars to investors.

The tech giant announced its first quarterly cash dividend, saying it would pay $0.20 per share on June 17 to shareholders of record on June 10, as well as a $70 billion share buyback. Buybacks and dividends help boost stock prices by rewarding investors with cash just for holding shares — but they are widely criticized for artificially inflating stock prices without spending on employees or improving the underlying business.

Google shares jumped as much as 13% in after-hours trading following the report.

The announcement came as part of Google’s earnings report for the first three months of the year, where it also reported that it exceeded Wall Street analysts’ expectations for both sales and profit. Revenue for the quarter came in at more than $80.5 billion, up 15% from the same period a year earlier and ahead of the $78.75 billion projected by analysts, according to FactSet estimates. The company also reported 57% year-over-year growth in profits to nearly $23.7 billion.

Alphabet chief executive Sundar Pichai attributed the success to the company’s investments in artificial intelligence, including large language models and a suite of AI products called Gemini.

“We are well underway with our Gemini era and there is great momentum across the company. Our leadership in AI research and infrastructure, and our global product footprint, positions us well for the next wave of AI innovation,” Pichai said.

Google’s decision is a sign of how investors may reward some tech companies for their investments in artificial intelligence, which many see as the future of the sector.

“We have a clear path to AI monetization through ads and cloud, as well as subscriptions,” Pichai said on a call with analysts following Thursday’s report.

But not every company has managed to convince investors that they are investing in AI responsibly. Meta shares fell on Thursday after the company raised its annual spending forecast to fund its AI ambitions, despite better-than-expected earnings results on Wednesday.

But in addition to Google, several positive tech earnings reports on Thursday helped turn around a sluggish day for tech stocks.

Snap results
Social media company Snap, the parent company of social media platform Snapchat, also saw its shares rise after hours following a stellar first-quarter earnings report that beat Wall Street estimates.

Snap reported revenue of about $1.19 billion for the first three months of the year, up 21% from the year-ago quarter. And it says daily active users are up 10% year over year. The company also offered a better-than-expected outlook for the current quarter.

Snap has been working to improve its advertising technology and offerings, while undergoing a restructuring aimed at cutting costs. Although it did report a net loss of $305 million for the March quarter, it was an improvement from its loss a year ago and better than analysts’ expectations.

Snap shares jumped about 25% in after-hours trading shortly after the report.

Microsoft’s earnings
Meanwhile, Microsoft reported a quarterly profit of $21.9 billion, up from $18.3 billion a year ago, signaling that the company’s efforts to double down on AI are also paying off. Revenue increased 17% year over year to $61.9 billion.

“Microsoft Copilot and the Copilot stack are orchestrating a new era of AI transformation, driving better business outcomes across every role and industry,” chief executive officer Satya Nadella said in a statement, referring to Microsoft’s AI services.

Microsoft shares rose more than 4% in after-hours trading Thursday.

While rivals play catch-up, Jeremy Goldman, senior director at market research company eMarketer, wrote in an analyst note that it’s clear that Microsoft’s early bet on OpenAI’s ChatGPT is paying off through products like Copilot for Microsoft365, an AI chat assistant built into its existing line of business products.

“Investors should keep an eye on potential AI spending surpluses, but for now, Satya Nadella’s forward-looking strategy is building value by applying productive intelligence across Microsoft’s entire portfolio, from the cloud to the desktop.”

Microsoft’s Azure cloud business is also experiencing strong growth – revenue up 31% – boosted by AI.