Ruth Porat, Alphabet and Google CFO
Ruth Porat, Alphabet and Google CFO Reuters/Stringer

Alphabet, Inc., Google’s parent company, disappointed shareholders by refusing to issue dividends following positive third quarter operating results but instead bought back shares.

Alphabet said it will buy back up to US$5.09 billion of its Class C shares, an announcement that stunned shareholders and analysts alike. This followed Alphabet’s disclosure that its third quarter revenue rose 13 percent to US$18.68 billion. Alphabet also saw an almost nine percent rise in its share price in after-hours trading on Oct. 22 to $741, a record high.

Alphabet hinted at distributing dividends during its last quarter call, when Alphabet and Google CFO Ruth Porat suggested in the second fiscal quarter that Google was likely to give cash back to shareholders in the form of a stock buyback program or dividends, reported USA Today.

Since Google remains conservative when it comes to paying dividends, there was speculation it was going to pay a low dividend per share. Google’s stock price traded at US$686.27 (AU$946.10) before the company revealed its third quarter results.

Alphabet’s market value now stands at some US$500 billion, making it the second most valuable company after Apple in the S&P 500.

The company also revealed the number of paid clicks, where advertisers pay only if a user clicks on an ad, increased 23 percent versus an 18 percent increase in the previous quarter.

"Our value proposition to markets of all sizes is simple. Google can help you show the right ads to the right people at the right moment,” said CEO Sundar Pichai.

Under Alphabet's new corporate structure, large operations such as search, advertising, maps, YouTube and Android will remain part of Google. Smaller operations like venture capital investments, Google Fiber, Nest and life sciences will fall under Alphabet.

"Our Q3 results show the strength of Google's business, particularly in mobile search. With six products now having more than 1 billion users globally, we're excited about the opportunities ahead of Google, and across Alphabet," said Porat in the company's results announcement.

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