Alphabet Remains a Top Consideration for Long Term Capital Appreciation

Image Source: TradingView

By Brian Nelson, CFA

On April 24, Alphabet (GOOG) (GOOGL) reported blockbuster results for the first quarter, with both GAAP earnings per share and revenue exceeding the consensus forecast. Consolidated Alphabet revenues increased 12%, or 14% in constant currency. Google Services revenue increased 10%, while Google Cloud revenues advanced 28%. Total operating income increased 20%, while its operating margin expanded 2 percentage points to 34% in the quarter. Net income increased 46%, while GAAP earnings per share increased 49%, to $2.81.

Management had the following to say about the quarter:

We’re pleased with our strong Q1 results, which reflect healthy growth and momentum across the business. Underpinning this growth is our unique full stack approach to AI. This quarter was super exciting as we rolled out Gemini 2.5, our most intelligent AI model, which is achieving breakthroughs in performance and is an extraordinary foundation for our future innovation. Search saw continued strong growth, boosted by the engagement we’re seeing with features like AI Overviews, which now has 1.5 billion users per month. Driven by YouTube and Google One, we surpassed 270 million paid subscriptions. And Cloud grew rapidly with significant demand for our solutions.

Alphabet raised its dividend 5%, and spent $2.4 billion on dividends during the three months ended March 31. The Board of Directors also authorized the repurchase of up to an additional $70 billion of its Class A and Class C shares. As of March 31, total cash, cash equivalents, and marketable securities totaled $95.3 billion, while long-term debt totaled $10.9 billion at the end of the quarter. Net cash provided by operating activities was $36.2 billion in the quarter, while the firm spent $17.2 billion in capital expenditures, resulting in free cash flow of ~$19 billion. We continue to like Alphabet as a top consideration in the Best Ideas Newsletter portfolio.

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