Alphabet tempers fears that it's falling behind in AI with blowout first-quarter results

Alphabet went into its earnings report on Thursday facing concerns about the growth of its core Google ads business and the company's ability to generate profits from its hefty investments in artificial intelligence.

For the time being at least, the company put Wall Street's fears to rest.

Alphabet topped analysts' estimates, reporting revenue growth of 15% for the quarter, the fastest rate of expansion since early 2022. Ad sales at YouTube jumped 20%, also beating expectations.

Questions have been swirling about the future of Google's online ads, because the biggest revenue driver remains search, which is under pressure as new generative AI services like OpenAI's ChatGPT offer consumers new ways to access information.

"We're very pleased with momentum of our ads businesses," Alphabet finance chief Ruth Porat said on Thursday's earnings call after the report. "Search had broad-based growth."

Alphabet shares jumped 12% in extended trading, pushing the company's market cap past $2 trillion. Prior to the report, the stock was up 12% for the year, ahead of the Nasdaq Composite but trailing some mega-cap peers like Meta, Nvidia and Amazon.

First-quarter results showed the core advertising business is reaccelerating after a difficult 2022 and 2023, when brands reeled in spending to contend with rising interest rates and inflationary concerns. Growth is spread across the digital ad market, with Meta reporting 27% growth for the first quarter, the fastest since 2021, and Snap reporting growth of 21%, a level not seen since early 2022.

Alphabet has been on a cost-cutting spree since last year in anticipation of slower ad growth and increased spending on AI, where competition has grown rapidly in the last year. The company has also