Alphabet Reports Strong Earnings Amid Legal Challenges and Market Concerns

WASHINGTON, D.C. — Alphabet Inc., the parent company of Google and YouTube, reported its first-quarter earnings on Thursday, revealing a 12% increase in overall revenue year-over-year, surpassing Wall Street’s 10% expectations. Shares of the company rose by as much as 4% in after-hours trading.

Google’s advertising revenue reached $66.89 billion, an 8.4% increase compared to a year ago. However, YouTube’s advertising revenue fell short of analyst predictions at $8.93 billion. The cloud computing division generated $12.26 billion, slightly below expectations of $12.27 billion, yet saw a remarkable 28% year-over-year growth with margins increasing to 17.8% from 9.4% a year ago.

Sundar Pichai, CEO of Google, highlighted the growth of the AI tool, AI Overviews, which now boasts 1.5 billion users monthly, up from 1 billion in October 2022. Alphabet’s net income surged 46% to $34.54 billion, while earnings per share climbed 49% to $2.81.

The company’s “Other Bets” segment, which includes Waymo and Verily, reported $450 million in revenue, a slight increase from $495 million a year earlier, but it also faced a loss of $1.23 billion, up from $1.02 billion.

As Alphabet moves forward, the company’s stock has dropped approximately 16% year-to-date, raising concerns among investors ahead of the earnings call. Analysts anticipate a 11% growth in revenue for Q1, expecting figures around $89.2 billion, with earnings per share projected at $2.02.

Despite declining stock prices, market experts express cautious optimism. Analysts from TD Cowen, UBS, and Scotiabank have adjusted their price targets for Alphabet, while retaining a “buy” rating. TD Cowen reduced its target from $210 to $195, and UBS lowered its target from $209 to $173.

The earnings report comes amid mounting legal issues for Google, including ongoing antitrust lawsuits that have prompted scrutiny over its market practices. These challenges could pose significant risks for the company.

Analysts are particularly interested in any new strategies Google plans to adopt in response to these legal challenges, as well as updates on their investment in AI technologies. The earnings report’s outcome could offer insight into Google’s path forward as it navigates a competitive landscape dominated by major players like Amazon and Microsoft.

The earnings call is seen as a critical moment for Alphabet as it seeks to reframe investor expectations while emphasizing its core business strengths.