Alphabet shares gain as Google search boosts profits

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Alphabet shares rose after it reported first-quarter profit surged 46 per cent, driven by another good performance in its search business and the boom in artificial intelligence-related demand for cloud computing power.

Net income jumped to $34.5bn compared with $23.7bn in the same three month period a year earlier, the parent company of Google reported on Thursday.

“Search saw continued strong growth, boosted by the engagement we’re seeing with features like AI Overviews,” said chief executive Sundar Pichai, referring to AI-generated answers it now shows at the top of many results pages. “Cloud grew rapidly with significant demand for our solutions.”

Google’s core search and advertising business grew almost 10 per cent to $50.7bn in the quarter, surpassing estimates for between 8 and 9 per cent.

The figures gave comfort to investors who have been watching closely for any softness in search — which accounts for 56 per cent of group revenues — due to the popularity of AI chatbots such as OpenAI’s ChatGPT, Anthropic’s Claude and Elon Musk’s Grok.

They have also been on alert for evidence that Google’s own Gemini chatbot and AI overview answers are cannibalising that core business by reducing the number of user clicks on ads.

The results were “better than feared, with healthy ads and cloud [revenue]”, said Jefferies analyst Brent Thill. He had previously cautioned that “macroeconomics and tariffs [would] cast a haze over the second and third quarter” and that advertising “faces headwinds” as Chinese sellers reduce spending.

The cloud computing division reported a 28 per cent surge in revenue to $12.3bn, showing continued demand for its data centre and network services from the boom in AI. However, this slowed from 30.1 per cent in the prior quarter.

Chief financial officer Anat Ashkenazi warned that “we are in a tight demand/supply environment” that could result in “variability in cloud revenue growth rates” across the year. She added that “we expect relatively higher capacity deployments towards the end of 2025” as more data centres come online.

Alphabet shares rose about 5 per cent in after-market trading. The company said it would buy back $70bn of shares, the same amount as last year.

Google is the second Big Tech company to report earnings in the wake of US President Donald Trump’s global trade war. Alphabet shares have fallen about 17 per cent this year. Like most of its rivals, the company has been affected by concerns about tariffs disrupting supply chains and softening consumer spending, promoting fears of a US recession.

Earlier this week, Tesla warned that tariffs would have an “outsized” impact on its battery business that relies on components from China. Chief executive Elon Musk pledged to continue to lobby Trump in favour of free-trade principles.

Alphabet’s spending on data centres, chips and other AI infrastructure continued to escalate. First-quarter capital expenditure jumped to $17.2bn, up from $12bn last year and slightly more than the $17.1bn estimate. The company has forecast spending will reach $75bn this year, up from $53bn in 2024.

Overall revenues rose 12 per cent to $90.2bn in the three months to the end of March, beating consensus expectations for $89.2bn, according to Capital IQ.

Alphabet has lost a succession of antitrust cases brought by US regulators against its search, digital advertising and play app store businesses. It faces the prospect of having to sell its Chrome browser, end an exclusive search engine partnership with Apple and share more data with rivals.