Google: Long-Term Opportunities Remain Compelling

Summary:

  • Alphabet posted strong 2Q23 results as it beat expectations for revenue, operating income and EPS.
  • Google Search and YouTube results show that advertising trends are improving and YouTube Shorts continue to gain momentum.
  • Google Cloud’s growth showed signs of stabilization but management cautioned that cloud spend optimizations continued in the quarter.
  • Generative AI was providing tailwind to Google Cloud and management saw strong demand for its generative AI capabilities in the quarter.
  • While there are elevated investments expected in technical infrastructure needed for AI opportunities to come, management is looking to maintain operating margins by re-engineering its cost base.
A man is using a notebook computer to searching for information. A virtual screen of the Search website browser for finding data on the internet. Global network, search engine optimization technology

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Alphabet (NASDAQ:GOOG) was once seen as a market darling given its somewhat monopolistic market positioning in the search space.

However, the company faced a rude awakening in the form of OpenAI’s ChatGPT. There has never been more at stake for Alphabet as


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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