In the recent earnings call, Alphabet Inc. GOOG GOOGL announced a significant increase in its capital expenditure, reflecting the company’s strong financial performance and its commitment to AI.
What Happened: Alphabet’s CFO Ruth Porat revealed a $12 billion capital expenditure during the company’s first-quarter earnings call. This substantial investment signifies the company’s confidence in the potential of AI across its business.
“Our reported capex in the first quarter was $12 billion, once again driven overwhelmingly by investment in our technical infrastructure with the largest component for servers followed by data centers. The significant year-on-year growth in capex in recent quarters reflects our confidence in the opportunities offered by AI across our business,” Porat said.
The earnings call also highlighted the company’s financial results for the first quarter. The consolidated revenues stood at $80.5 billion, marking a 15% increase year-over-year. The growth was primarily driven by the strength in search and cloud services.
Porat also underscored the impact of restructuring charges and employee severance on the total expenses. The company’s operating income saw a significant rise, reaching $25.5 billion, a 46% increase from the previous year.
Within the Google Services segment, revenues reached $70.4 billion, with Google Search and other advertising revenues contributing $46.2 billion. YouTube advertising revenues also saw a substantial increase, reaching $8.1 billion.
The Google Cloud segment reported revenues of $9.6 billion, marking a 28% increase. The Other Bets segment saw revenues of $495 million, with an operating loss of $1 billion.
Why It Matters: The first-quarter earnings call reflects Alphabet’s strong financial performance and its strategic focus on AI. The company’s CEO, Sundar Pichai, had earlier projected a combined revenue of $100 billion from its YouTube and Cloud businesses by 2024, indicating a new growth phase for the company.
Moreover, Pichai has expressed confidence in the company’s ability to manage the costs associated with the new search experience, including generative answers. This indicates Alphabet’s commitment to innovation and its readiness to capitalize on the potential of AI.
Price Action: Alphabet's Class A stock rose 11.56% to $174.04, while Class C stock rose 11.43% in after-hours trading to $176.23, according to data from Benzinga Pro at the time of writing
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This content was partially produced with the help of Benzinga Neuro and was reviewed and published by Benzinga editors.
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