Alphabet Earnings: GOOGL stock adds 10% on healthy margins, new dividend, $70 billion buyback scheme


  • Alphabet reported Q1 earnings late Thursday that beat Wall Street estimates.
  • YouTube advertising and the Cloud segment continue growing strong.
  • Alphabet CEO Sundar Pichai introduces $0.20 cash dividend.
  • GOOGL stock is trading between $169.31 and $174.68, Fibo levels.

 

Alphabet (GOOGL), the parent of Google and YouTube, is clinging to a 10% gain midway through Friday after posting spectacular first-quarter results. For the quarter ending March 31, Alphabet posted revenue of $80.5 billion compared with a consensus of $78.7 billion. This amounted to a 15% growth rate from a year prior.

For the bottom line, earnings of $1.89 per share far surpassed the consensus of $1.50 as the past quarters’ focus on cost-saving pushed Alphabet’s operating margin from 25% to 32% in one year.

Alphabet stock news

The Silicon Valley search giant reported ad revenue from YouTube advancing 21% from a year ago. Likewise, the Google Cloud segment saw its star rise as revenue jumped 28% YoY.

Like Microsoft (MSFT), Alphabet exudes confidence on many fronts as if it has no competition. Operating income surged 46% from the previous year to $25.5 billion. Net income was $23.7 billion.

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

Pichai was briefly in hot water this past week after firing employees who protested the company’s sale of technology to Israel, which is engaged in a controversial war in Gaza.

But Gemini, the renamed and reworked Bard AI chatbot that has had several iterations within Alphabet’s AI lab, stole the show. Pichai praised the service, which is now in competition with OpenAI’s GPT-4.

The company has reached such a stage of maturity that management opted to apply the company’s first ever dividend payment of $0.20 per share. The cash dividend is payable to owners of record on June 10, and officials said the dividend policy would continue in the future. Now there’s just 25 years until it becomes a Dividend Aristocrat.

Alphabet also initiated a new $70 billion buyback scheme. It’s party time for the shareholders.

AI stocks FAQs

First and foremost, artificial intelligence is an academic discipline that seeks to recreate the cognitive functions, logical understanding, perceptions and pattern recognition of humans in machines. Often abbreviated as AI, artificial intelligence has a number of sub-fields including artificial neural networks, machine learning or predictive analytics, symbolic reasoning, deep learning, natural language processing, speech recognition, image recognition and expert systems. The end goal of the entire field is the creation of artificial general intelligence or AGI. This means producing a machine that can solve arbitrary problems that it has not been trained to solve.

There are a number of different use cases for artificial intelligence. The most well-known of them are generative AI platforms that use training on large language models (LLMs) to answer text-based queries. These include ChatGPT and Google’s Bard platform. Midjourney is a program that generates original images based on user-created text. Other forms of AI utilize probabilistic techniques to determine a quality or perception of an entity, like Upstart’s lending platform, which uses an AI-enhanced credit rating system to determine credit worthiness of applicants by scouring the internet for data related to their career, wealth profile and relationships. Other types of AI use large databases from scientific studies to generate new ideas for possible pharmaceuticals to be tested in laboratories. YouTube, Spotify, Facebook and other content aggregators use AI applications to suggest personalized content to users by collecting and organizing data on their viewing habits.

Nvidia (NVDA) is a semiconductor company that builds both the AI-focused computer chips and some of the platforms that AI engineers use to build their applications. Many proponents view Nvidia as the pick-and-shovel play for the AI revolution since it builds the tools needed to carry out further applications of artificial intelligence. Palantir Technologies (PLTR) is a “big data” analytics company. It has large contracts with the US intelligence community, which uses its Gotham platform to sift through data and determine intelligence leads and inform on pattern recognition. Its Foundry product is used by major corporations to track employee and customer data for use in predictive analytics and discovering anomalies. Microsoft (MSFT) has a large stake in ChatGPT creator OpenAI, the latter of which has not gone public. Microsoft has integrated OpenAI’s technology with its Bing search engine.

Following the introduction of ChatGPT to the general public in late 2022, many stocks associated with AI began to rally. Nvidia for instance advanced well over 200% in the six months following the release. Immediately, pundits on Wall Street began to wonder whether the market was being consumed by another tech bubble. Famous investor Stanley Druckenmiller, who has held major investments in both Palantir and Nvidia, said that bubbles never last just six months. He said that if the excitement over AI did become a bubble, then the extreme valuations would last at least two and a half years or long like the DotCom bubble in the late 1990s. At the midpoint of 2023, the best guess is that the market is not in a bubble, at least for now. Yes, Nvidia traded at 27 times forward sales at that time, but analysts were predicting extremely high revenue growth for years to come. At the height of the DotCom bubble, the NASDAQ 100 traded for 60 times earnings, but in mid-2023 the index traded at 25 times earnings.

Alphabet stock forecast

Alphabet stock has held onto a roughly 10% gain through nearly half the session on Friday after issuing quarterly results that delighted Wall Street. 

The morning’s session high of $174.71 gave way by mid-morning, but GOOGL stock found support nearby $170 and has fought to a stalwart recovery. Even near all-time highs, the stock's price action looks strong.

GOOGL stock has opened and spent the entire Friday session trading between the 78.6% Fibonacci Extension at $169.31 and the 100% Fibo at $174.68. Traders will buy in if Alphabet's share price breaks above that price level. Likewise, a break below the 78.6% Fibo will result in a flurry of selling.

Bears will notice that GOOGL stock is now back in overbought territory on the Relative Strength Index (RSI), which it hasn't been since April 1.

GOOGL daily chart

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