Alphabet, the parent company of Google and YouTube, reported first-quarter earnings that exceeded analysts’ expectations, primarily driven by robust performance in its core search advertising business. Meanwhile, Google Cloud – the company’s key growth metric – recorded a significant increase in profitability.

Alphabet’s ongoing investment in artificial intelligence (AI) underpinned growth across all segments. Chief Executive Sundar Pichai said: “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.”

Shares in Alphabet rose nearly 5% in after-hours trading, following a 2.5% rally during regular trading on Thursday. Despite the upbeat results, the stock remains down 16% year-to-date, amid broad tech-sector sell-offs triggered by tariff-related concerns on Wall Street.

Alphabet’s board also approved an additional $70 billion (€61.7 billion) in share buybacks and raised its dividend by 5% to $0.21 (€0.19) per share.

Google advertising business posts solid growth

Alphabet reported total revenue of $90.2bn (€79.5bn), up 12% on the year, surpassing the $89.12bn (€79.2bn) expected by analysts. Google’s search advertising remained the largest revenue contributor, generating $50.7bn (€44.7bn) in the quarter, a 9.8% year-on-year increase.

The company recently launched AI Overviews in Google Search, which summarise results at the top of the page. The feature has gained popularity, attracting 1.5 million users per month and becoming a spotlight in the company’s competition with Microsoft’s ChatGPT and other chatbot technologies. However, the rollout has led to reduced traffic for independent websites.

In addition, the company warned that US tariff policy may negatively affect advertising revenue this year. Google’s Chief Business Officer Philipp Schindler said President Donald Trump’s decision to end the de minimis trade exemption would create a “slight headwind” for advertising income, particularly from Asia-Pacific-based retailers.

The de minimis rule – which allows imports valued below $800 (€706)to enter the US duty-free – will end on 2 May. The move targets lower-cost imports, particularly Chinese e-commerce products from platforms such as Temu and Shein. These companies are likely to reduce their advertising spend on Google as a result.

Google Cloud sees profit surge

Google Cloud revenue rose 28% year-on-year to $12.3bn (€10.8bn), led by strong growth across Google Cloud Platform (GCP), such as core GCP products, AI infrastructure, and generative AI solutions, according to the earnings report.

A highlight of the results was the division’s profitability. Operating income surged more than 200% from a year ago to $2.18bn (€1.92bn) in the first quarter. While revenue slightly missed forecasts, the sharp rise in profit suggests Alphabet’s heavy AI investments are beginning to yield returns.

Chief Financial Officer Anat Ashkenazi said that demand continued to exceed data centre capacity for a second consecutive quarter. She noted in February that Alphabet expects to invest $75bn (€66bn) in capital expenditure this year. Google Cloud remains the world’s third-largest cloud provider, trailing Amazon’s AWS and Microsoft’s Azure.

YouTube ads and Waymo

YouTube advertising revenue reached $8.93bn (€7.87bn), up 10% year-on-year, slightly below analysts’ expectations. However, the segment has accelerated in recent quarters, supported by growth in YouTube TV and podcast offerings.

Alphabet’s self-driving car unit, Waymo, generated $450 million (€397 million) in revenue, down 9% from a year earlier. Waymo, a key rival to Tesla’s Robotaxi, remained loss-making during the quarter. CFO Ashkenazi commented: “Waymo is continuing to progress in building on its impressive technological achievements to scale rapidly and develop a sustainable business model.”