Alphabet made a significant announcement on Thursday, declaring its first-ever dividend and a $70 billion stock buyback.
This news delighted investors, leading to a remarkable surge of nearly 16% in the stock price after the bell.
Alphabet Inc. Issues First Dividend
The Google parent company is allocating funds while investing heavily in data centers to keep pace with competitors in the field of generative artificial intelligence. The dividend payout is set at 20 cents per share.
Meta Platforms, a major player in the tech industry, recently made headlines by declaring its inaugural dividend. This unexpected move had a profound impact on the company's stock market value, which skyrocketed by a staggering $196 billion within a day. Amazon is the only Big Tech firm that has yet to offer a dividend.
The company's decision comes in the wake of Meta's board approving its inaugural dividend in February. As of March 31, 2024, Google's parent company had a staggering $108 billion in cash and marketable securities.
Stock prices surged by 15% during after hours trading. The news was revealed in conjunction with first-quarter earnings that exceeded expectations.
Alphabet approved a repurchase of the same size one year ago, amidst a time of significant cost-cutting and workforce reductions.
The dividend will be distributed to all types of shares, including those with super-voting rights and those without voting rights.
The majority of Google investors hold the company's Class A shares. Shareholders who are recorded as of June 10 will receive the dividend in the same month.
The co-founder, Sergey Brin, is set to receive a substantial payout of $146 million. Brin owns an impressive number of Class B and C shares, totaling over 730 million. Co-founder Larry Page, with his ownership of 389 million Class B shares, is set to receive a dividend payment totaling $78 million.
Investors have been seeking indications of growth and development from technology companies. In 2022, numerous prominent tech companies made the difficult decision to downsize their workforce and implement stricter budgetary measures.
According to CNBC, investors have responded positively to these efforts, and have also shown enthusiasm for share buybacks and dividend initiations. In February, the announcement of Meta's inaugural dividend caused a significant surge in share prices, with an increase of over 14%.
Over the past year, Google has seamlessly integrated AI technology into various aspects of its product lineup. This includes providing users with accurate answers to their queries in the search engine, assisting content creators in producing videos on YouTube, and offering helpful suggestions for drafting documents on Google Docs.
However, the company experienced a significant setback in its AI ambitions during the first quarter. In February, it came to light that Google's Gemini chatbot had been generating images that were not always historically accurate.
These images depicted US founding fathers and World War II-era German soldiers as multiracial, and even portrayed women as past popes. Additionally, it declined to provide images featuring individuals of Caucasian descent. Internet users took to social media to express their outrage.
Google executives have acknowledged the issue and taken immediate action by temporarily disabling the chatbot's capability to generate images of people.
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Google's Parent Company Hails AI Opportunity
In Thursday's earnings report, the company provided limited insight into the success of the chatbot, which is available in both free and paid versions, as a business venture. In a statement, Sundar Pichai, the chief executive of Google, expressed that the company is making significant progress in its Gemini era.
In an effort to sustain funding for Gemini and other A.I. products, Alphabet has implemented cost-cutting measures, which have unfortunately resulted in workforce reductions. Throughout the year, there have been employee layoffs across various business units, such as YouTube, finance, and the core engineering division.
As of March 31, Alphabet's employee count stood at 180,895, showing a slight decrease from the previous quarter's figure of 182,502. However, it is worth noting that there has been a significant drop of nearly 10,000 employees compared to the same time last year.
In late 2019, the company had a total workforce of 119,000. However, during the pandemic, the company experienced a significant increase in the usage of its online services, leading to a hiring spree.
Google's search and related revenue saw a solid increase of 14 percent in the first quarter, reaching $46.2 billion. This surpassed the estimated figure of $45 billion, as predicted by analysts.
Advertising sales at YouTube, Google's video platform, exceeded analysts' expectations, reaching $8 billion, a 21 percent increase.
Google Cloud, the company's unit that provides software and computing services to other businesses, announced a significant increase in sales. Sales rose by 28 percent, reaching $9.6 billion. Analysts had projected a figure of $9.4 billion, according to NY Times.
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