(Reuters) – On Thursday, Google parent Alphabet eased anxious tech investors by showcasing how its AI investments are enhancing returns within its vital ad sector, dismissing concerns over global economic fluctuations, at least for now.
The search titan exceeded expectations for its first-quarter profits and revenue, announcing a $70 billion stock buyback, which led to a 4% surge in shares after market hours and added $75 billion to its overall market valuation.
Alphabet reiterated its ambitious AI expansion plans and maintained its guidance of $75 billion in capital expenditures for the year, providing optimism to investors in Meta and Amazon, whose stocks also climbed in after-hours trading.
Concerns over a potential economic slowdown stem from U.S. President Donald Trump’s trade policies, causing businesses to reconsider their advertising expenditures. This has fueled fears among investors that tech giants could delay or scale back their AI infrastructure investments due to rising costs from retaliatory tariffs imposed between the U.S. and China.
Despite this, major tech firms continue to advocate for their substantial AI investments as essential for remaining competitive. However, analysts have noted early indications that tech leaders may be pulling back on new data center projects.
“I perceived the prevailing narrative about infrastructure spending as particularly negative, implying that AI investments had peaked, signaling a deflation of the bubble. What Google indicated today contradicts that notion entirely,” stated Will Rhind, CEO of worldwide ETF provider GraniteShares.
Revenue from Google’s core advertising business, which constitutes nearly three-quarters of total revenue, climbed 8.5% to $66.89 billion for the quarter — a deceleration from the previous quarter’s 10.6% growth, yet still surpassing analysts’ forecasts of a 7.7% increase.
Nonetheless, Google’s Chief Business Officer Philipp Schindler cautioned analysts during a conference call that the company remains susceptible to macroeconomic challenges.
“The adjustments to the de minimis exemption will likely create a slight headwind for our advertising segment in 2025, especially affecting APAC-based retailers,” he remarked, referencing Trump’s recent directive to eliminate a trade exemption for low-value packages from China and Hong Kong entering the U.S. duty-free.
Some of the largest advertisers in the U.S. include Chinese e-commerce platforms Temu and Shein, which are significantly reducing their digital ad spending in the U.S., according to industry reports. This could impact advertising revenue for both Google and Meta, its parent