Alphabet Earnings: Continued Strong Advertising Growth Pushes Our Fair Value to $179 From $171

Alphabet delivered strong results during the first quarter, with revenue growth accelerating and restructuring efforts driving margin expansion. The firm also instituted a dividend, which will total about $10 billion annually at the initial rate, and authorized an additional $70 billion of share repurchases. While growth likely won’t maintain this quarter’s pace throughout this year, Alphabet’s results position it to exceed our expectations for the year. As with Meta, the firm is ramping up efforts to develop artificial intelligence technology, setting expectations that capital investment will continue at the current pace, implying full-year spending of nearly $50 billion versus about $32 billion each of the past two years. Alphabet is taking a tougher stance on costs than its AI rival, continuing to cut headcount and consolidating teams to blunt the impact of infrastructure investments on profitability.