Alphabet Unleashes $70 Billion Buyback After Blowout Quarter

Alphabet (GOOG) delivered a powerful performance in the first quarter, with earnings and revenue surpassing Wall Street expectations and sending its stock soaring.

Revenue surged 12% year-over-year to $90.2 billion, while net income jumped an eye-catching 46% to $34.5 billion, or $2.81 per share. Operating income rose more than 20%, with margins expanding to 34%. Advertising revenue topped $66.8 billion, and Google Cloud brought in $12.2 billion, up from $9.5 billion in the same period last year.

CEO Sundar Pichai highlighted the growing momentum of Gemini 2.5, Google’s latest AI model, which is now integrated into search and cloud services. “Our AI roadmap is really gaining steam,” he said, signaling further Gemini deployments across Google’s platforms.

Alphabet also announced a 5% dividend hike to $0.21 per share and unveiled a massive $70 billion share repurchase plan—a capital return strategy that dwarfs most of its peers.

Stock Buyback Signals Confidence Despite Legal and Competitive Pressures
Alphabet’s stock jumped more than 5% Friday, reflecting investor enthusiasm for both its earnings and buyback plan. With a market capitalization hovering around $2 trillion, a $70 billion buyback is equivalent to eliminating the entire market cap of a mid-size S&P 500 company like Kraft Heinz (KHC) or Dell (DELL).

The company may have felt pressure to act. Shares had fallen 23% from February highs, and analysts note that repurchasing stock at lower valuations is a classic play for long-term value creation. The repurchase program alone could shrink Alphabet’s share count by about 3.4% annually, mechanically boosting earnings per share over time.

The announcement comes as Alphabet faces multiple antitrust lawsuits. A federal judge recently ruled that its advertising exchange operates as an illegal monopoly. Its search business is also under scrutiny, with speculation that Google may be forced to unwind its exclusivity agreements with hardware makers like Apple (AAPL). Paradoxically, ending those payments—reportedly $20 billion annually—could improve Alphabet’s earnings by cutting costs.

Valuation Discount Offers Opportunity Amid Uncertainty
Despite the positive earnings report, Alphabet trades at a notable discount. Its forward price-to-earnings (P/E) ratio stands at 17—well below the S&P 500 average of nearly 21 and significantly lower than the average 26 times earnings commanded by other “Magnificent Seven” tech giants, excluding Tesla (TSLA).

Alphabet now boasts the lowest forward P/E of the Magnificent Seven, positioning it as a rare value play in a growth-dominated sector. Investors may be underestimating the resilience of Alphabet’s core businesses and the potential of its AI portfolio. Gemini, Lens, and NotebookLM are making their way into Google One subscriptions, aiming to fend off threats from OpenAI and others in the booming AI arms race.

The stock’s free cash flow yield is also compelling at around 4%, outpacing many peers. With $76 billion in expected free cash flow for 2025, Alphabet appears well-positioned to weather regulatory storms and capitalize on AI growth.

Still, technical analysts warn that the stock must break above resistance levels near $180 before momentum can truly turn. For now, Alphabet’s fundamentals tell a bullish story, even if investor sentiment has yet to fully catch up.

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