Alphabet Inc. shares gained more than 5% in premarket trading Friday after the Google parent company reported stronger-than-expected advertising revenue, demonstrating how its artificial intelligence investments are paying off even as growth in its cloud computing business slowed.  

The company's first-quarter results showed resilience in its core advertising business, which accounts for about three-quarters of total revenue. Google advertising sales rose 8.5% to $66.89 billion, exceeding the 7.7% growth analysts had forecast, according to LSEG data. While slower than the previous quarter's 10.6% increase, the performance reassured investors about Alphabet's ability to monetize its AI advancements in search and advertising tools.  

"Alphabet is delivering well on the AI front, proving many skeptics wrong," said Gerrit Smit, manager of Stonehage Fleming Global Best Ideas Equity Fund.  

Google Cloud revenue grew 28% to $12.26 billion, just below analyst expectations of $12.27 billion and down from 30.1% growth in the prior quarter. The moderation suggests some enterprises may be becoming more cautious about their cloud spending amid economic uncertainty.  

Alphabet plans to invest about $75 billion this year in expanding its data center capacity to support its AI ambitions. The spending is part of an estimated $320 billion that Big Tech companies are expected to invest in AI infrastructure in 2025, with Microsoft planning to spend more than $80 billion.  

The strong earnings report led at least seven brokerages to raise their price targets on Alphabet stock. Morgan Stanley said in a research note that Alphabet's vast user base and steady rollout of generative AI products position it as a "relative outperformer" in the tech sector.  

However, challenges remain. Alphabet shares are still down about 16% this year, underperforming Microsoft's 8% decline and Meta's 9% drop. The company also faces regulatory risks, including an ongoing U.S. Justice Department antitrust case that could force changes to its business practices.  

The results highlight how major technology companies are navigating an environment of heavy AI investment, economic uncertainty and regulatory scrutiny while trying to maintain growth. Alphabet's ability to deliver strong advertising results while continuing to invest aggressively in AI infrastructure suggests it remains well-positioned in the competitive landscape.