Alphabet Shares Rise Due to Growth in Google Search Profits

Alphabet shares rose by more than 4 percent after the company reported double-digit revenue and profit growth in the first quarter, primarily due to strong results from Google Search and increasing demand for cloud computing services related to artificial intelligence.

Revenue increased by 12 percent, reaching $90.2 billion, while net profit soared by 46 percent to $34.5 billion compared to the same period last year, announced the parent company of Google. The results exceeded analysts’ expectations and alleviated investors’ fears about the company’s resilience to potential trade wars and an economic recession in the U.S.

Google’s core business, search and advertising, achieved revenue growth of nearly 10 percent, to $50.7 billion, surpassing market forecasts of 8 to 9 percent. Given that this segment accounts for 56 percent of the group’s total revenue, investors closely monitored signs of a potential slowdown, especially in light of the increasing popularity of AI chatbots like ChatGPT (OpenAI), Claude (Anthropic), and Grok (Elon Musk).

Particular concern arises from the possibility that Google’s own AI system, Gemini, and its automated answer summaries may reduce the number of user clicks on ads, potentially undermining the company’s main source of revenue.

– “Search continues to see strong growth, supported by user engagement with features like AI Overviews,” said CEO Sundar Pichai, referring to AI-generated answers displayed at the top of search results.

– “We are investing heavily in this, expanding the availability of the feature to more countries, users, and queries,” he added.

Results Better Than Expected

Chief Business Officer Philipp Schindler added that “monetization is approximately equal” for AI Overviews compared to traditional search links, although he did not provide specific data on user click-through rates.

Jefferies analyst Brent Thill rated the results as better than expected, with healthy growth in advertising and cloud computing. He previously warned that macroeconomic pressures and tariffs could negatively impact business in the second and third quarters, and that advertising could suffer due to reduced spending by Chinese merchants. The company also announced a new $70 billion share buyback program, the same amount as last year.

The increase in net profit was also influenced by a one-time revenue of $8 billion based on shares in an unnamed private company.

Alphabet is the second major tech company to report business results after U.S. President Donald Trump initiated a new trade war. Alphabet shares have fallen about 17 percent this year, and the company, like its competitors, is suffering from uncertainties related to tariffs, disrupted supply chains, and weaker consumer spending, further fueling fears of a potential recession.

– “We are not immune to macroeconomic conditions,” Schindler admitted.

The White House raised tariffs in early April on small shipments valued up to $800, which had previously been exempt. As a result, Chinese e-commerce platforms Temu and Shein sharply reduced their investments in digital advertising on platforms like Google and Meta. Schindler warned that this policy change would “slightly impact advertising business in 2025, primarily from Asian merchants.”

These measures have already raised concerns in other sectors. Tesla warned this week that tariffs would “disproportionately” affect its battery business, which relies on Chinese components. Elon Musk announced he would continue lobbying for free market principles.

Despite the challenges, Alphabet’s total revenues exceeded the consensus of Wall Street analysts, who expected $89.2 billion according to Capital IQ.

The cloud computing segment grew by 28 percent to $12.3 billion, confirming strong demand for data centers and online services driven by the AI revolution. However, growth has slowed somewhat compared to the previous quarter when it was 30.1 percent. The company attributes this to the fact that demand currently exceeds available capacity, while simultaneously intensively building new data centers.

Alphabet’s investments in chips, networking equipment, and other AI infrastructure continue to grow despite investor concerns about the “big five” plan for $300 billion in capital expenditures in 2025. Capital expenditures in the first quarter jumped to $17.2 billion, up from $12 billion a year earlier, and were slightly higher than the projected $17.1 billion. The company estimates that total investments this year will reach $75 billion, compared to $53 billion in 2024.

Despite strong financial indicators, Alphabet continues to face legal challenges. A series of antitrust lawsuits have been filed against the company in the U.S., relating to its operations in search, digital advertising, and the Google Play store. In the event of a loss, Alphabet could be forced to sell its Chrome web browser, terminate its exclusive partnership agreement with Apple, or share more data with competitors. If Chrome is put up for sale, interested parties have already emerged in the form of Yahoo, and OpenAI has also expressed interest.