subscription growth – Fountainheadinvesting

Alphabet stock surged by double digits — (NASDAQ: GOOG) +12%, — after its first-quarter earnings easily cleared analyst expectations as revenues jumped 15% with strong performance, particularly at YouTube.

Revenues rose to $80.54B, easily topping consensus for $78.7B. Advertising revenue rose 13% to $61.7B.

Meanwhile, YouTube ads revenue — previously an area of concern — rose a full 21% to $8.09B. Subscriptions, platforms, and devices revenue jumped 18%.

And the momentum in Cloud continued, with 28% revenue growth and operating income that more than quadrupled year-over-year.

Operating income jumped 46% year-over-year, to $25.47B. Earnings per share landed at $1.89 vs. $1.50 expected by Wall Street.

The operating margin also expanded, to 32% from a year-ago 25%.

“Our results in the first quarter reflect strong performance from Search, YouTube, and Cloud,” said CEO Sundar Pichai. “We are well underway with our Gemini era and there’s great momentum across the company.”

Revenues by segment: Google search and other, $46.16B (up 14.4%); YouTube ads, $8.09B (up 20.9%); Google Network, $7.41B (down 1.1%); Google subscriptions, platforms and devices, $8.74B (up 17.9%); Google Cloud, $9.57B (up 28.4%); Other Bets, $495M (up 71.9%).

Operating income by segment: Google Services, $27.9B (up 28.3%); Google Cloud, $900M (up 371%); Other Bets, -$1.02B (vs. year-ago -$1.23B); Alphabet-level activities, -$2.3B (vs. year-ago -$3.3B).

The company also authorized the buyback of up to an additional $70B worth of shares and declared a cash dividend of $0.20 per share.

Confluent (CFLT) the stock popped 25% to $30 on great results and guidance.

My last few recommendations in the past two weeks, when the price was $24, was to buy up to $26, with a 1-year target of $28, with a return potential of over 25% in the next 3-5 years.

Wouldn’t advise trying to jump in over $30, there was a short interest of 11% yesterday, so that contributed a ton to the post-earnings pop, but given the performance, I will buy on declines – I still see annual gains over 20% from here – some of the gains have been pulled forward with this jump.

Here are my forward estimates:

3 Year Revenue growth expected 27% – Current P/S 9, drops to 5.6 by 2026,

3-Year Adjusted Earnings growth expected – Management has guided to adjusted operating break even in 2024, and post-2024, I expect at least 35% to 40% operating profit growth (analysts’ estimates are even higher).

Summary of 2023 earnings

Q4 Non-GAAP EPS of $0.09 beats by $0.04.

Revenue of $213M (+26.0% Y/Y) beats by $7.72M.

Fourth quarter subscription revenue of $203 million, up 31% year over year; fiscal year 2023 subscription revenue of $729 million, up 36% year over year
Fourth quarter Confluent Cloud revenue of $100 million, up 46% year over year; fiscal year 2023 Confluent Cloud revenue of $349 million, up 65% year over year
Confluent Crowd is their big growth catalyst
1,229 customers with $100,000 or greater in ARR, up 21% year over year
Q1- 2024, Confluent guidance:
Total revenue between $211 million and $212 million VS $210.54M consensus
Subscription revenue between $199 million to $200 million
Non-GAAP operating margin of approximately negative 4%
Non-GAAP net income per diluted share between $0.00 to $0.02 vs $0.02 consensus
Fiscal year 2024, Confluent guidance:
Total revenue of approximately $950 million $935.29M consensus;
Non-GAAP operating margin of approximately 0%
Non-GAAP net income per diluted share of approximately $0.17 vs $0.17 Consensus