Google
parent
company
Alphabet
(GOOGL) reported
earnings
after
the
market
close
on
April
25.
Here’s
what
our
analyst
thought
of
the
latest
quarterly
numbers.
•
Fair
Value
Estimate:
$179
•
Morningstar
Rating:
3
stars
•
Morningstar
Economic
Moat
Rating:
High
•
Morningstar
Uncertainty
Rating:
Wide
We’re
increasing
our
fair
value
estimate
to
$179
from
$171
per
share.
With
the
jump
in
the
stock
price
following
the
earnings
release,
the
shares
now
look
fairly
valued.
What
We
Thought
of
Alphabet’s
Earnings
Alphabet delivered
strong
results
during
the
first
quarter,
with
revenue
growth
accelerating
and
restructuring
efforts
driving
margin
expansion.
The
firm
also
instituted
a
dividend,
which
will
total
about
$10
billion
annually
at
the
initial
rate
and
authorised
an
additional
$70
billion
of
share
repurchases.
While
growth
likely
won’t
maintain
this
quarter’s
pace
throughout
this
year,
Alphabet’s
results
position
it
to
exceed
our
expectations
for
the
year.
As
with
Meta,
the
firm
is
ramping
up
efforts
to
develop
artificial
intelligence
technology,
setting
expectations
that
capital
investment
will
continue
at
the
current
pace,
implying
full-year
spending
of
nearly
$50
billion
versus
about
$32
billion
each
of
the
past
two
years.
Alphabet
is
taking
a
tougher
stance
on
costs
than
its
AI
rival,
continuing
to
cut
headcount
and
consolidating
teams
to
blunt
the
impact
of
infrastructure
investments
on
profitability.
Google
Search
and
YouTube
Advertising
Higher
Total
revenue
increased
15%
year
on
year
versus
13%
last
quarter,
continuing
the
accelerating
trend
seen
over
the
past
year,
though
the
leap
year
added
about
1%
to
growth.
Search
advertising
increased
14%,
with
online
retailers,
including
those
based
in
Asia,
driving
growth.
Asian
retailers
began
stepping
up
spending
in
the
second
quarter
of
last
year,
which
will
create
a
headwind
over
the
balance
of
2024.
YouTube
advertising
surged
21%,
which
management
attributed
to
rapid
improvement
in
the
monetisation
of
Shorts,
in
addition
to
usage
growth.
The
cloud
business
also
delivered
impressive
growth,
with
revenue
up
28%,
the
best
result
in
more
than
a
year,
as
AI
use
cases
augmented
growth
in
the
compute
and
Workspace
productivity
businesses.
Continued
strong
subscriber
growth
drove
an
18%
increase
in
other
Google
services
revenue
from
the
prior
year.
As
the
firm
announced
earlier
this
year,
YouTube
TV
now
has
more
than
8
million
subscribers,
and
we
estimate
that
the
service
contributed
about
half
of
the
growth
in
this
segment.
The
operating
margin
expanded
nearly
4
percentage
points
to
32.5%,
excluding
heavy
restructuring
charges
a
year
ago.
Management
expects
efficiency
gains
across
the
business
will
offset
increasing
depreciation
expense,
allowing
the
operating
margin
to
expand
in
2024
versus
the
prior
year.
Capital
spending
nearly
doubled
year
on
year
to
$12
billion
during
the
quarter,
resulting
in
free
cash
flow
dropping
slightly
to
$16.8
billion.
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