Alphabet (NASDAQ:GOOG) stands as one of the tech giants, notable for its extensive portfolio of subsidiaries covering high-growth sectors. Google stock is still a name that can’t be ignored.
Moving beyond conventional tech, Alohabet continues to explore AI’s potential in areas like nuclear energy for sustainable power solutions, aiming to pioneer AI technology. Financially, Alphabet reported a strong year with a 15% sales increase, generating $16.8 billion in free cash flow.
In Q1, Google Cloud’s revenue surged 28% to $9.6 billion, with operating income rising sharply to $900 million from $191 million year-over-year. With fixed costs like data centers and maintenance, reaching a certain size allows economies of scale to boost profitability.
Let’s dive into these results are likely to continue, and if GOOG stock is really the AI stock investors should be focused on right now.
Recent Developments and Google Stock
Alphabet shares dropped Monday after reports that Microsoft Corp. urged its China-based employees to use Apple (NASDAQ:AAPL) iPhones, effectively banning Android devices.
Google developed Android for touchscreen devices. Earlier, Microsoft President Brad Smith met with China’s Commerce Minister to discuss AI and U.S.-China trade relations.
Reports suggested Apple was negotiating with Chinese companies like Alibaba (NYSE:BABA) to integrate AI into its China-sold devices. BofA analyst Justin Post upheld a Buy rating on Alphabet, targeting $200, citing Alphabet’s strong long-term AI prospects for search, YouTube, and Cloud.
Statcounter’s June data shows Google’s global search market share rose to 91.1%, while Bing’s increased to 3.7%. Google gained market share both globally and in the U.S., suggesting AI integrations might boost query growth, thereby boosting ad growth.
Analyst Justin Post is optimistic about growing Gemini integration and broader AI rollout, expecting increased usage and monetization. He also noted that year-over-year margin growth in 2024 could positively impact EPS.
The analyst noted Alphabet would benefit from rising mobile and video usage, Google Play activity, and connected device activity.
With its tech leadership, high margins, and strong cash flow for buybacks, Alphabet should trade at a premium compared to media peers.
Generative AI in Gmail
Google recently launched a Gemini-powered summary feature in Gmail for Android, which can summarize lengthy newsletters and recap conversations. This generative-AI tool is expected to increase Alphabet’s traction among Android users using Google Workspace.
Google introduced Gemma 2, a lightweight AI model in 9B and 27B parameter sizes, to boost AI deployment across enterprises.
Alphabet expanded its AI-powered note-taking app, NotebookLM, from the U.S. to 213 additional countries.
Google also launched YouTube Music Gemini Extension, allowing users to search and play music via an AI chatbot and upgraded Android Studio’s bot with Gemini Pro.
This helps developers integrate generative AI features into apps. These initiatives position Alphabet to capitalize on the generative AI market, projected by Statista to grow from $36.06 billion in 2024 to $356.10 billion by 2030, with a CAGR of 46.5%.
Buy GOOG Stock
Alphabet continues to streamline its workforce amid accelerating revenue growth. Google Cloud continues to outpace its peers in the world of online advertising, driven by robust AI trends.
I think these trends are likely to persist, with promising growth ahead. Analysts foresee long-term potential, rating Alphabet as a strong buy with around 7% projected upside from here. The highest price target of $225 implies a 21% increase from current levels.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.