We encountered bullish papers on the Alphabet (GOOG) on Elliot's substitution. In this article, we will summarize the Bulls' paper on GOOG. As of April 28Th. According to Yahoo Finance, GOOG's backward and forward P/E are 18.13 and 18.05, respectively.
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Alphabet (GOOG) performed well, with revenue up 14% year-on-year, GAAP's profits increased by 20%, and profit margins increased ahead of schedule. Almost every major segment reported healthy growth, and despite fears that AI would undermine its core search business, there is little evidence of structural erosion. However, stocks are barely moving. The static reaction stems from Google's cautionary tone of Q2, highlighting macroeconomic uncertainty and the impact of the end of the De Minimis rule, which affects low-cost, cross-border direct to consumers (D2C) imports from Asia. On top of that, the company's ambitious $75 billion capital expenditure plan in 2025 (for AI data centers and computing), raising concerns about future depreciation and pressure on GAAP margins. Still, addressing these short-term issues shows that a company grows at a rate of 10% to 12% per year, while GAAP margins are 33% north of the main and defensible search franchise. Alphabet's trading is only a modest multiple of 2026 earnings and looks cheap - especially if you think it retains its core economy and can normalize CAPEX growth over time.
Search remains the foundation of Google's business, with the first quarter results showing no signs of material damage. Revenue rose 10% year-on-year, mainly due to pricing rather than quantity, which shows that monetization is still strong even if demand softens. Paid clicks grew by just 2%, but CPC's average growth rate was 2%, and Google noted that AI overview now reaches 1.5 billion users per month, monetization roughly matches traditional results. The company is also trying to search for the "AI model" (using multi-step, more complex queries) that could expand the monetization surface. Visual and multimodal search is another emerging moat, with features like Circle now searching on 250 million devices and seeing a 40% increase in sequential use. The lens is attracting too. Meanwhile, the slow fading of Google's network business has been falling for 11 consecutive quarters, quietly helping profit margins by reducing TAC's heavy, low-profit advertising revenue. As a result, service margin reached a record 42.3% in the quarter. Overall, generating bear cases where AI cannibalize searches is still speculative. If this interrupted paper is not implemented in the short term, the valuation of letters becomes increasingly difficult to justify at the current level.
YouTube also released strong numbers, with advertising revenue rising 10% and shorts engagement volumes up 20%. In key development, YouTube's subscription business, including music and premium, hit 125 million global subscribers and helped increase the total subscriptions for letters to 270 million. The business is now reporting under the subscription, platform and device segment, growing 19% and surpassing YouTube ads for the first time. As early as the second quarter of 2022, the two parts were roughly equal, but the subscription has since been advanced, emphasizing the importance of recurring, high-profit income. If Google continues to integrate AI-powered features into these bundles, such as personal assistants, productivity tools, or enhanced searches, the potential for price increases will be real. YouTube also maintains a unique position across content formats, from short and long-term videos to live, podcasts and music, supported by its wider ecosystem. The monetization of shorts is still growing, and the company is further entering the brand-keeping ad format, indicating that growth here is far from over.
Google Cloud remains one of the fewest assets in the alphabet. The business just exceeded $50 billion in annual operating rate, up nearly 30% and operating margins reached 18%, a major leap from the low figure a year ago. This is impressive in a highly competitive high-standard market. Google tends to use products like Vertex AI, Sovereign Cloud, and Distributed Cloud, namely infrastructure, open source tools, and hybrid deployments. The company's custom TPU (now Gen 7, called Ironwood) offers 10x performance and 2x power efficiency, giving Google a real cost advantage of AI inference workloads. This infrastructure stack positions Google Cloud as a core monetization platform, not only for enterprise customers, but also for the entire AI strategy of the alphabet. If Google can continue to build capabilities and lock in AI workloads, the segment may see a lot of operational leverage.
On the AI front, Q1 marks a turning point. Gemini 2.5 is now embedded in major Google products (Search, YouTube, Android, and Workspace) with over 500 million users with AI enhancements. Product development has accelerated, with tools such as Gemini Live, Circle to Crope searches, and AI agents receiving powerful early feedback. Internally, Gemini are already pushing for real productivity gains: More than 30% of Google Now’s code submissions involve AI advice, up from 25% a few months ago. This internal leverage range not only extends to engineering, but therefore represents a structural headwind on the edge to customer service, financial and legal functions. Unlike many competitors, Google can not only benefit from AI, not only as a revenue opportunity, but also as an efficiency engine that helps offset growing costs.
The only real investor hangs up is capital expenditure. Google spent $17 billion in the first quarter and reiterated its annual guidance of $75 billion, up more than 40% from 2024. This aggressive investment (mainly in AI infrastructure) will substantially increase the depreciation, which has increased the depreciation by 31%, and is expected to accelerate the pressure in 2025. This is the pressure on GAAP, that is, the continuous competition in the competition and the competition has lasted for a while. If Google continues to extract productivity and revenue from this spending, it will prove durable. Meanwhile, with its resilient core business, strong profit margins, and inestimable subscriptions and cloud engines, Alphabet represents a fascinating investment once AI monetization stories become totally expensive.
Alphabet Inc. (GOOG) on our list The 30 Most Popular Stocks in Hedge Funds. According to our database, 174 hedge fund portfolios held GOOG at the end of the fourth quarter, compared with 160 in the previous quarter. Although we acknowledge the risks and potential of GOOG as an investment, our belief lies in the belief that certain AI stocks have greater hope and provide higher returns in a shorter time frame. If you are looking for AI stocks that are more promising than GOOG but have less than 5 times its earnings, check out our report Cheapest AI stocks.
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Disclosure: None. This article was originally published in Insider Monkey.