Alphabet reports first-quarter earnings that exceed initial expectations and credits 'unique full-stack approach to AI' for growth

Alphabet, the parent company of Google and YouTube, reported its first-quarter earnings Thursday after market close, mostly exceeding initial revenue estimates, sending shares up 4%.

Alphabet Inc., comprised of Google and a collective of companies called Other Bets, reported its first-quarter earnings results during a conference call on Thursday.

Google CEO Sundar Pichai said in a statement that the company's "strong Q1 results, which reflect healthy growth and momentum across the business," reflect its "unique full stack approach to AI."

"This quarter was super exciting as we rolled out Gemini 2.5, our most intelligent AI model, which is achieving breakthroughs in performance and is an extraordinary foundation for our future innovation," said Pichai in the earnings report. "Search saw continued strong growth, boosted by the engagement we're seeing with features like AI Overviews, which now has 1.5 billion users per month."

Investors tuning in are also closely listening for updates about Alphabet's cloud business, which has become a vehicle for its pursuits in artificial intelligence. Slowed Cloud business growth and a larger-than-expected capex forecast for 2025 sent Alphabet's shares down over 8% in February.

Despite seeing 28% of year-on-year growth compared to the first quarter in 2024, Google Cloud still became the only revenue stream that fell short of initial estimates.

Alphabet unveiled its most ambitious generative AI in 2023 with Bard, which later became Gemini. Gemini's users have grown significantly, but it still trails far behind OpenAI's ChatGPT and Meta AI.

Meanwhile, Google is facing new competition in search, a sector it has long dominated. While EMARKETER senior analyst Evelyn Mitchell-Wolf says Google's search business hasn't yet fallen behind new rivals like Perplexity and China's DeepSeek, it's not impossible.

"As new rivals fine-tune their offerings and attract a larger share of queries, double-digit growth for Google Search is not assured," Mitchell-Wolf said.

Investors also tuned in to hear how President Donald Trump's tariffs are affecting the tech company. Commerce Secretary Howard Lutnick said tech products would be excluded from reciprocal tariffs but could be subject to additional tariffs in the future.

Mandeep Singh, an analyst at Bloomberg Intelligence, said in an analyst note that Alphabet's commitment to its $75 billion capex guidance suggested its exposure to tariffs "is limited to Cloud infrastructure and hardware sales."

Here are the key numbers for the fourth quarter compared to analysts' estimates compiled by Bloomberg:

• Earnings per share: $2.81 vs. $2.01 expected
• Revenue: $90.23 billion vs. $89.1 billion expected
• Google advertising revenue: $66.89 billion vs. $66.39 billion expected
• YouTube advertising revenue: $8.93 billion vs. $8.94 billion expected
• Google Cloud revenue: $12.26 billion vs. $12.31 billion expected

Thursday's earnings call came as Alphabet navigates increased scrutiny from federal regulators. The Justice Department and several states filed an antitrust lawsuit against Google in 2020. Four years later, a federal judge ruled that Google spent billions to make its search engine the default on iPhones, Android devices, and web browsers.

"After having carefully considered and weighed the witness testimony and evidence, the court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly," District Judge Amit Mehta wrote.

This month, Judge Leonie Brinkema of the US District Court for the Eastern District of Virginia ruled that Google holds an illegal monopoly in specific online advertising markets.

Brinkema wrote in her ruling that the Justice Department and states that filed an antitrust lawsuit against Google proved the company "willfully engaged in a series of anticompetitive acts to acquire and maintain monopoly power in the publisher ad server and ad exchange markets for open-web display advertising."

"For over a decade, Google has tied its publisher ad server and ad exchange together through contractual policies and technological integration, which enabled the company to establish and protect its monopoly power in these two markets," Brinkema wrote.

Google and the Justice Department are now in the middle of a remedies trial related to the search engine ruling. Both parties will make arguments before a judge determines the appropriate market remedy. Google, for its part, is trying to avoid being forced to divest certain products, like the Chrome browser.