Alphabet GOOGL is leveraging AI to attract new clients, win larger deals and deepen product adoption among existing customers. GOOGL is adding AI features to its Google TV devices through its Gemini models.
The latest AI enhancements, set to be rolled out later this year, will help users interact with Google TV more intuitively. Searching through media has become easier, with users now being able to ask questions about “travel, health, space, history and more, with videos in the results for added context.”
Alphabet has been adding new features to Google TV, the latest being the new Google TV Streamer, a new home panel that allows control of compatible smart home devices, and a new sports page in the For You tab that brings all sports content into one place.
Alphabet’s Gemini models are currently used by more than 2 billion users monthly across products and platforms. Gemini comes in four sizes, forming a versatile model family that runs efficiently on everything, from data centers to devices.
GOOGL has been expanding its AI proficiency through the frequent update of its models. In December, Alphabet unveiled Gemini 2.0, its most capable model that powers AI agents.
PaliGemma 2, GOOGL’s latest version of the tunable vision-language model (VLM), built on the performant Gemma 2 models, is another step forward in strengthening AI footprint.
Gemma is the result of the same research and technology GOOGL used to develop Gemini models. PaliGemma 2 models can see, understand and interact with visual input. The VLM can read long captions and generate detailed, contextually relevant captions for images.
GOOGL continues to invest in state-of-the-art infrastructure to support its AI efforts globally. It is leveraging AI to improve the coding process, and more than 25% of all new code at Google is currently generated by AI.
The integration of Generative AI (Gen AI) technology into the search engine is benefiting Google Search. Large Language Models, coupled with multi-search and visual exploration features, are continuously improving the search results.
New AI-powered enhancements, such as AI Overview, Circle to Search and advanced features in Lens, are improving user experience. AI Overview currently reaches more than 1 billion users monthly, and engagement levels are quite strong. The integration of ads within AI Overviews bodes well for Alphabet’s monetization efforts.
Circle to Search is now available on more than 150 million Android devices, with people using it to shop, translate text and learn more about the world around them. Lens has become the fastest-growing query type due to its ability to help in product discovery and shopping.
Alphabet is leveraging AI and Gen AI to boost Pixel’s features. The devices run on Google Tensor G4 chips, which help bring the Gemini Nano with Multimodality, Google’s latest on-device AI model.
In the highly competitive cloud infrastructure market, Google Cloud has solidified its position as the third-largest provider compared with Amazon’s AMZN cloud arm, Amazon Web Services and Microsoft MSFT Azure.
Alphabet is seeing strong demand due to an innovative AI infrastructure. GOOGL offers customers a range of AI accelerator options, including multiple classes of NVIDIA NVDA GPUs and custom-built TPUs.
Enterprise AI platform Vertex is gaining rapid adoption. Enterprises are combining Alphabet’s AI platform with data platform BigQuery to make accurate real-time decisions. BigQuery machine learning operation saw 80% growth over the past six months, driven by this strong demand.
Despite stiff competition in the cloud and AI domains, GOOGL shares have returned 38.7% in the trailing 12 months, outperforming the Zacks Computer & Technology sector and Microsoft but lagging AMZN. Over the same timeframe, the sector has returned 37.7%, while MSFT and AMZN have appreciated 12.4% and 46.7%, respectively.
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GOOGL shares are trading above the 50-day and 200-day moving averages, indicating a bullish trend.
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The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues is pegged at $75.86 billion, indicating 12.24% year-over-year growth.
The consensus mark for first-quarter fiscal 2025 earnings is pegged at $2.03 per share, unchanged over the past 30 days, suggesting 7.41% year-over-year growth.
Alphabet’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 11.84%.
Alphabet Inc. Price and Consensus
Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
The Value Score of C suggests a stretched valuation for Alphabet at this moment.
Alphabet stock is trading at a premium, with a forward 12-month Price/Sales of 7.23X compared with the industry’s 6.04X.
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Alphabet’s growing GenAI capabilities present a potential catalyst for the future amid stiff competition in the cloud space and increasing regulatory headwinds. GOOGL’s dominant position in the search engine market and strong position in the cloud are long-term drivers.
Alphabet is facing increasing regulatory headwinds and global scrutiny over its search dominance. Google’s alleged wrong practices constitute the utilization of Android to promote its own search engine unfairly. It is facing several lawsuits regarding data privacy, competition practices, AI usage, and copyright issues in several countries across the globe.
Alphabet continues to face rigorous scrutiny and any scenario involving a forced breakup by the U.S. government can have serious repercussions over its prospects. Moreover, stiff competition in the cloud space from Microsoft and Amazon is a headwind.
Alphabet currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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