Q2-24 Earnings
June revenue at Alphabet grew 5% sequentially from March to $84.3 billion, a 13% year-over-year rise and a bit of a deceleration from March’s 15.4% year-over-year rise.
Q2 GAAP EPS of $1.89 beats by $0.04.
At $180, Alphabet is priced at only 21-times 2025 earnings. Very reasonable for a member of the M-7, search market leader, AI pioneer, and owner of You-Tube.
Why is it down post earnings: WSJ’s title was apt Google Fails to ‘Wow’ as AI Bills Mount
- Overall revenue exceeded Wall Street’s consensus projection by just 0.6%—the lowest beat percentage in at least five years,
- Capex = $49Bn for the year, this was mostly expected but still got a thumbs down, because depreciation will hurt the bottom line.
Google has to spend to keep up – it doesn’t have a choice.
“Look, obviously we are at the early stage of what I view as a very transformative area,” Alphabet Chief Executive Sundar Pichai “the risk of underinvesting is dramatically greater than the risk of overinvesting for us here,” not mentioning the record amounts of capex that tech rivals Microsoft, Amazon and Meta Platforms are pouring into the same thing.
Rejected Alphabet’s bid for $23Bn – I think that’s actually good for Google, at 46x current year sales. Granted this would have given them a considerable leg up in cybersecurity – but is a $500Mn revenue company, which would never move the needle for the behemoth.
I own GOOG, and plan to hold for a long, long time, it’s been recommended on several occasions here. I could buy more if the price drops but given the change in sentiment towards big tech I’m happy to sit on the sidelines for a bit.
There seems to be an inflection point – the rate of growth is going to get lower on tougher comparisons and therefore there is more hesitation to buy at inflated levels.