Alphabet Announces First-Ever Dividend and $70 Billion Stock Buyback

Alphabet announces first-ever dividend, $70B buyback, and strong Q1 results, sending stock soaring 16% and pushing market cap above $2T.

Waqas Arain
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Alphabet Announces First-Ever Dividend and $70 Billion Stock Buyback

Alphabet Announces First-Ever Dividend and $70 Billion Stock Buyback

Alphabet Inc., the parent company of Google, announced its first-ever quarterly dividend of 20 cents per share and a $70 billion stock buyback program on Tuesday. The news sent the company's stock surging nearly 16% in after-hours trading, adding more than $250 billion to its market capitalization and pushing its value above $2 trillion.

The dividend will be paid on June 17 to shareholders of record as of June 10 and will apply to all three of Alphabet's share classes. The $70 billion stock repurchase program is an expansion of the company's existing buyback plan. Alphabet ended the first quarter with $108 billion in cash, securities, and short-term investments.

Alphabet reported strong financial results for the first quarter of 2024, with revenue rising 15% year-over-year to $80.54 billion, the fastest growth rate since early 2022. Earnings per share increased by 57% to $1.89, beating analysts' expectations. The company's performance was driven by strong growth in its Search, YouTube, and Cloud businesses.

Why this matters: Alphabet's announcement marks a significant shift in its capital allocation strategy and a response to pressure from Wall Street to become more shareholder-friendly. The move also follows similar actions by other tech giants, such as Meta Platforms, which announced its first-ever dividend in February.

CEO Sundar Pichai highlighted the company's leadership in AI research and infrastructure, stating that Alphabet is "well under way with our Gemini era" in reference to its generative AI efforts. However, the costs associated with AI investments and their potential impact on Alphabet's search business remain a concern for investors.

Alphabet's cloud revenue grew nearly 30% year-over-year, as the company continues to compete with rivals like Amazon and Microsoft in the cloud market. The cloud business saw a significant increase in operating income, more than quadrupling to $900 million, indicating that Alphabet is finally generating substantial profits after heavily investing in the business.

Despite the increased spending on AI and data centers, Alphabet's operating margin expanded to 32% from 25% a year ago, beating expectations. CFO Ruth Porat said the company expects its operating margin in 2024 to be higher than last year.

"Our strong first quarter results reflect the value we provide to our users and partners, as well as our sustained investment in AI and other growth areas," said Pichai. "We are excited about the opportunities ahead and remain focused on delivering long-term value for our shareholders."

Key Takeaways

  • Alphabet announces first-ever quarterly dividend of 20 cents per share.
  • Alphabet launches $70 billion stock buyback program, expanding existing plan.
  • Q1 2024 revenue up 15% YoY to $80.54B, EPS up 57% to $1.89, beating estimates.
  • Alphabet's cloud revenue grew nearly 30% YoY, with significant increase in operating income.
  • Alphabet's operating margin expanded to 32%, higher than expected, with focus on AI and growth.