Alphabet Inc. Shakes Up Market with First Dividends, $70 Billion Buyback

It’s looking to be a good week for Alphabet, as Google’s parent company soars in value on the stock market due to recent announcements for investors.

Dividends and Buybacks

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Alphabet Inc., the parent company of tech behemoth Google, announced on Thursday that it will be issuing its first-ever dividend to investors, as well as authorizing a $70 billion stock buyback.

20 Cents Per Share

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It was news worth celebrating for Google investors, who will receive 20 cents per share as part of the dividend payout and has sent Google shares soaring after a particularly bad day on the markets.

Google and Alphabet Shares Jump in Value

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After the news was announced Alphabet shares shot up by 15% in after-hours trading, and Google shares jumped by 13%.

Stock Market Valuation Surges

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The parent company saw its stock market value surge from $300 billion to over $2 trillion.

Two Months After Meta

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The dividend announcement came after the company’s promising first-quarter earnings were announced, and two months after major competitor Meta released its own first-ever round of dividends.

Not a Surprise

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The move to pay dividends to investors saw Meta’s stock value climb by $196 billion in a single day following the announcement, so it’s hardly surprising that their rival has now made a similar move.

An Artificial Strategy?

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While many investors are no doubt pleased by the payout decision, some experts and analysts have also criticized these dividend announcements as a move that artificially inflates stock value without making material improvements to the company itself.

Revenue Picks up

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Alphabet’s revenue also increased by 15% since the year before, and Google’s first-quarter sales and profit also outpaced analysts’ expectations.

“A Breath of Fresh Air for the Tech Market”

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“Alphabet’s announced dividend payouts and buybacks on top of the solid earnings beat are not only a breath of fresh air for the tech market as a whole,” said senior analyst Thomas Monteiro, “but also a very intelligent strategy for the search engine giant going into a tough time of the year.”

Is AI the Reason?

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Sundar Pichai, the current CEO of both companies, has cited their push toward artificial intelligence as the main driver for their recent successes. So far, Alphabet has poured billions into new data centers in a bid to keep up with competitors.

In Their Gemini Era

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

Google’s New Chatbot

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Gemini refers to Google’s new AI-powered chatbot, which is the same name but can be used across text, code, audio, image, and video.

“Clear Paths to AI Monetization”

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“We have clear paths to AI monetization through ads and cloud, as well as subscriptions,” he told analysts.

“We are encouraged that we are seeing an increase in search usage among people who are using the AI overviews.”

Google Cloud Revenue Jumps

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Google Cloud revenue, in particular, has seen a significant boost due to the popularity of AI tools that require cloud services. In those three months, Google Cloud revenue rose by 28%.

Expenditures at $12 Billion

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With the aggressive push into AI technologies, Alphabet’s expenditures increased to $12 billion, 91% higher than expenditures from a year earlier.

AI Push Will Continue Through 2024

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CFO Ruth Porat also told analysts that she expects expenditures for the rest of 2024 to remain at that level and possibly rise even higher, as the company is unlikely to slow down on its artificial intelligence offerings.

All Shareholders Can Claim Dividends

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The dividends will be applied to all share types, including Class A, Class B super-voting, and Class C non-voting shares.

Tens of Millions for Major Shareholders

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This means that major shareholders, such as co-founders Sergey Brin and Larry Page, will collect tens of millions in dividends. Brin is set to receive a tidy sum of $146 million.

Will Amazon Join Them?

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While Alphabet and Meta have finally confirmed their first round of dividends this year, many wonder if their third most significant competitor, Amazon, will follow suit.

No Announcements Yet

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Amazon has yet to announce any dividend payouts for investors. Its only buyback announcement was for $10 billion worth of stock back in 2022, still far eclipsed by Google’s $70 billion.

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