According to a report published by Citigroup Research, Google's parent company Alphabet's first-quarter results beat market expectations. The company recorded revenue of US$80.5 billion (excluding foreign exchange, up 16% year-on-year), which was about 2% higher than market expectations. Operating revenue was US$25.5 billion, which was about 15% higher than market expectations. GAAP earnings per share were US$1.89, which also exceeded market expectations of US$1.51. The bank's target price for the company was $168, giving it a “buy” rating.
According to the report, the biggest concern is the increase in search business revenue. Due to improvements in the online advertising environment, search business revenue growth accelerated by about 170 basis points to a year-on-year increase of 14.4%, and the performance exceeded expectations. YouTube revenue increased 20.9% year-on-year, about 5% higher than market expectations, while Google Cloud's revenue growth accelerated by about 270 basis points year-on-year to 28.4%. The bank noted that Google services recorded an operating profit margin of 39.6%, an increase of about 450 basis points over the same period last year, while the cloud profit margin was 9.4% (up 680 basis points). Significantly, Google announced a cash dividend of $0.20 per share and expanded the buyback to around $70 billion. In the conference call, the bank will focus on search trends, SGE and Gemini integration, YouTube's multi-channel strategy, demand for Google Cloud (new AI products), and cost controls for RIFS and Google's recent restructuring.