Google parent company announces plan to buy back stock amid a slight drop in ad sales
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Google’s parent company, Alphabet, plans to buy back $70 billion worth of stock. The buyback plan also comes after the company released its profits and revenue for the first quarter, which topped estimates. The company also reported increased demand for cloud services and ad sales.
Alphabet announces stock buyback plan
Alphabet shares dropped by 2% on Monday after the company reported a slight decline in ad sales for the first quarter compared to the same period during the previous year. The ad sales in Q1 came in at $54.55 billion, which surpassed analyst estimates of $53.71 billion.
This was the third decline in ad sales reported by the company since its IPO in 2004. It was also the second consecutive drop as in Q4 2022, the ad sales dropped by 3.6%. Alphabet also reported earnings per share of $1.17, which beat the average estimate of $1.07.
According to analysts, Google surpassed the revenue and earnings per share expectations for the first quarter. The company also reported a notable profit in cloud computing. However, Google Cloud was lagging behind its competitors, and the growth numbers were also slowing. The sales for the Google Cloud unit increased to $7.41 billion.
The advertisers accounting for most sales on Alphabet have trimmed their spending at the company to respond to consumers moving back to in-store shopping as COVID restrictions are eased. Marketers are also exploring new platforms such as TikTok to attract young spenders.
Alphabet has also been looking for ways to cut costs amid fears of a recession. In January, the company announced it was trimming 12,000 jobs. The Chief Financial Officer at the company, Ruth Porat, informed investors that she anticipated capital expenditures during the year to be modestly higher compared to 2022.
Alphabet is also exploring ways to reduce spending. The CFO sent an internal email to workers saying that they should expect additional cost-cutting measures in the coming months. She also said that Alphabet planned to configure its cost base to invest in areas such as artificial intelligence and cloud computing.
Alphabet faces stiff competition
Alphabet has been struggling to compete against its rivals, such as Microsoft, in exploring new technologies such as artificial intelligence. Microsoft is launching a new artificial intelligence software to issue long-form responses to questions and other prompts.
The tech giant has committed $10 billion to the developer of ChatGPT, OpenAI. The ChatGPT chatbot has been attracting much attention since a free version was released in November.
Microsoft released its earnings results on Tuesday, surpassing Wall Street estimates. The company’s profit and revenue increased, largely driven by growth in the company’s cloud computing and Office productivity software businesses.
On the other hand, Alphabet ended the quarter with revenues of $69.79 billion compared to the previous estimates of $68.95 billion, according to the data shared by Refinitiv. The company also reported net profits of $15.05 billion in the first three months of this year compared with $16.44 billion a year ago.
