Alphabet continues to grow, makes good stock bets

20 years ago, on April 23 2005, the first YouTube video was uploaded. The following year, Google acquired the platform in exchange for a share package worth 1.65 billion US dollars at the time. Today, YouTube stores 20 billion videos and an average of 20 million new videos are uploaded every day. This was stated by Alphabet's CEO Sundar Pichai on Thursday as part of the announcement of the latest quarterly figures. The investment has paid off for the Google Group: Alongside the search engine called Google, YouTube is the strongest driver of the Group's continued strong growth.

While the search engine lives from advertising and the cloud business from subscriptions, YouTube stands on both feet: Anyone who can no longer stand the increasing flood of advertising but does not want to do without the videos has to pay a subscription. It promises to play "most" videos without advertising.

In the first three months of 2025, Google generated revenue of 77.3 billion US dollars, an increase of 6.9 billion dollars or 19 percent. 8.9 billion dollars in revenue was generated by advertising on YouTube alone, ten percent or 800 million dollars more than in the first quarter of 2024. Subscription revenue even increased by 19 percent or 1.6 billion dollars to 10.4 billion dollars; YouTube and Google One are the main drivers of subscription growth.

Advertising, which Google provides for third-party websites and apps, is the only shrinking segment: 7.3 billion dollars in quarterly revenue represents a decline of two percent. Google's core is and remains its search engine: it exceeded the 50 billion dollar revenue mark in the quarter, reaching 50.7 billion dollars, an increase of ten percent or 4.5 billion dollars year-on-year. Insurance companies and retailers in particular have recently placed more advertising. However, the 50.7 billion dollars also includes other Google revenues.

Operating cash flow +25%

In addition to Google (including YouTube), the Alphabet Group as a whole also includes the separately reported Google Cloud (+28% revenue to 12.3  billion dollars) and Other Bets. The latter are risky ventures that do not yet generate significant revenue and often disappear into oblivion. Their turnover fell by a total of nine percent to 450 million dollars. This includes Waymo, whose self-driving cars now carry out 250,000 paid passenger journeys per week in Arizona, California and Texas, according to Pichai. Atlanta in the US state of Georgia is to be added this year, followed by Miami and Washington, DC next year.

In total, Alphabet generated revenues of 90.2  billion dollars in the first quarter of 2025, an increase of twelve percent. Of this, 30.6 billion dollars remained as operating profit (+20%). Operating cash flow even increased by a quarter to 36.2 billion dollars.

It is striking that Google Cloud more than doubled its operating profit from 900 million dollars to 2.2  billion dollars. Google's operating profit increased by 17 percent to 32.7 billion dollars. Meanwhile, operating losses in Other Bets widened by 20 percent to 1.2 billion dollars. Waymo's autonomous motorized trucks are obviously not yet profitable.

Stock bets are paying off

Alphabet's investments in shares of other companies are doing even better than the actual business. While Alphabet's interest income remained stable at one billion dollars in the quarter and investments in bonds were profitable (202 million dollars profit after 462 million dollars loss), book profits from shares have virtually exploded: 9.8 billion dollars have been generated. This is more than four times the figure for the same quarter of the previous year and even 31 percent more than the figure for the full year 2024. Alphabet does not, however, disclose what proportion of the securities gains was realized and what proportion was only on paper as at the reporting date of 31 March.

In total, the data company almost quadrupled its other quarterly profits to 11.2 billion dollars. Together with the operating profits, this results in a pre-tax profit of 41.8 billion dollars (+48%). Alphabet increased its tax provisions by 56 percent to 7.2 billion dollars. All in all, net income increased by 46 percent to 34.5 billion dollars.

"We are pleased with our strong results this quarter," said Pichai to the financial analysts. Nevertheless, the management is only increasing the dividend by five percent or one US cent to 21 cents per share. In return, a new share buyback program worth 70 billion dollars will be launched. Institutional investors like it, Google shares rose almost five percent in after-hours trading following the announcement of the quarterly figures.

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