Alphabet’s shares jumped about 3% on Friday. The company’s solid earnings report showed investors that its AI bets were fueling growth in the core advertising business. This soothed concerns around competition and tariff-related pressures.
Google’s advertising revenue rose a better-than-expected 8.5% in the first quarter. This provided a welcome respite to investors. They worried that a decline in U.S. ad spending amid global trade tensions could significantly dent the digital ad market.
Industry data from early April showed a sharp pullback in U.S. digital ad spending from Temu and Shein. These companies are the biggest advertisers on Google Search in the U.S.. This fanned fears.
Reports indicated that cloud computing rivals Amazon and Microsoft scaled back on some data center projects. This sparked fears that Big Tech might have been overly aggressive in its AI-related outlays. Rising economic uncertainty could now be forcing companies to rethink their plans.
Deutsche Bank analyst Benjamin Black wrote, “Against the backdrop of negative sentiment and data checks, regulation woes, competition concerns and macro related fears, Alphabet reported a blow to bears, with… strong growth across all major segments.”
Google noted that the Trump administration’s recent trade policy changes would cause a “slight headwind” to its ads business this year. However, executives did not raise any alarm bells on a broad advertising slowdown.
Google’s report helped lift social media stocks higher on Friday. Instagram-parent Meta Platforms rose 1.5%, and image-sharing platform Pinterest rose nearly 2%. Snapchat-owner Snap climbed more than 3%.
Alphabet announced a $70 billion share buyback plan. The company also said AI Overviews now have 1.5 billion users per month. These summaries appear above traditional hyperlinks to relevant webpages. This is within about a year after its launch.
BofA Global Research said, “Google is in a race versus OpenAI, Perplexity and others to drive AI usage, and we continue to believe Google has data and distribution advantages and has closed the … performance gap.”
Alphabet’s 12-month forward price-to-earnings ratio stands at 17.33. It trails Microsoft’s 26.56 and Meta’s 20.49. The stock has fallen about 16% this year, while Microsoft and Meta have lost some 8% and 9%, respectively.
Bernstein analyst Mark Shmulik said, “Perhaps Dr. Google is just what this market needed — a healthy dose of strong fundamental performance.”
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