By Julia Love, Bloomberg<\/p>\n
Alphabet Inc. reported quarterly revenue and profit that beat projections, fueled by strong growth in its cloud computing unit, signaling that the internet giant\u2019s unprecedented investments in AI infrastructure are beginning to pay off.<\/p>\n
Google\u2019s parent company said first-quarter revenue, excluding partner payouts, was $94.7 billion, compared with the $91.6 billion expected on average by analysts, according to data compiled by Bloomberg. The company reported earnings per share of $5.11, compared with Wall Street\u2019s $2.62 per share estimate.<\/p>\n
Alphabet shares gained more than 4% in after-hours trading, after closing at $349.94.<\/p>\n
Google has been spending billions on a plan to build enough data centers with powerful servers for itself and its cloud clients as fast as possible. Investors are looking at the cloud business for signs about whether demand will continue to grow \u2014 which is considered a strong indicator for the pace of the AI boom. Google is locked in a tight race with startups Anthropic PBC and OpenAI to develop AI that can perform on par with humans and sell it to businesses and consumers.<\/p>\n
Google\u2019s cloud computing unit reported sales of $20 billion, compared with the $18.4 billion analysts\u2019 projection. The unit saw a \u201cmeaningful acceleration in growth,\u201d driven by demand for its AI software and infrastructure, Google said in a statement. Backlog \u2014 the measure of contracted work that hasn\u2019t been recorded as revenue yet \u2014 nearly doubled from the prior quarter to over $460 billion, the company said.<\/p>\n
The company said it would increase its dividend by 5%, resulting in a quarterly cash dividend of $0.22.<\/p>\n
Alphabet said in February that capital expenditures will reach as much as $185 billion this year, double what it spent last year but aligned with record spending plans at rival companies.<\/p>\n
Over the past few years, Google has been hustling to reinvent its business for the AI age, trying to keep consumers in the habit of going to its search page as chatbots from startups such as OpenAI and Anthropic become more popular. The company now delivers AI-generated answers in response to many searches \u2014 a shift that has had major implications for how companies that rely on Google traffic make money.<\/p>\n
Search queries were at an all-time high, with the integration of AI driving usage, Chief Executive Officer Sundar Pichai said in a statement.<\/p>\n
In prior quarters, Alphabet\u2019s profit has been boosted by recording a higher value of its investments in private companies, including SpaceX, which is planning an initial public offering later this year. It\u2019s a major investor in Anthropic PBC too. Anthropic said last week that Google will invest up to $40 billion in the startup. Google\u2019s relationship with both companies has grown competitive, too: SpaceX now owns xAI, Elon Musk\u2019s artificial intelligence and chatbot company. And internally, Google leaders have grown increasingly worried about falling behind Anthropic in AI coding, as the startup\u2019s offering, Claude Code, becomes a breakout hit product.<\/p>\n
(Updates with shares in the third paragraph.)<\/p>\n