Alphabet’s (NASDAQ:GOOG) stock is surging, recently hitting a 52-week high, with a 56% gain in 2023, totaling a five-year increase of 152%.
Expectations are high for Alphabet following the company’s Q3 results, driven by its strong focus on AI integration across products.
Revenue and Financials Are Strong
Alphabet’s stock is showing strength with an IBD RS rating above 80 since mid-July, a sign of potential growth based on historical trends. The stock has already increased by over 10% since that time. More gains may be on the horizon.
Google Advertising covers Google Search, YouTube, and Google Network ads. Google Search is responsible for 73% of ad revenue, selling ads on its search results page. YouTube, 13% of ad revenue, offers video ads on YouTube Red and YouTube TV.
Google Network, which provides 14% of ad revenue, places ads on Google Shopping, Gmail, Maps, and more. This contributes to a substantial ad income for Alphabet, surpassing Meta’s earnings. Alphabet’s cloud services also made $8 billion in the last quarter.
Alphabet’s Q2 revenue increased by 7% year-over-year, and net income grew by 12.5%. Analysts expect a 10% year-over-year revenue growth last quarter, suggesting profit growth for Q3. With $118 billion in cash and minimal debt, GOOG can leverage high interest rates, generating income from its cash reserves. It also has room for strategic acquisitions to enhance long-term financial performance.
A Great Contender in the AI Race
In H1 2023, U.S. online search and e-commerce ad spending increased by 9%. Search ad revenue should surge by 17% in 2024. Alphabet’s Google, a leader in this category, will benefit. AI’s growth will drive cloud infrastructure spending, particularly benefiting Google Cloud. Recent results show operating profits for Google Cloud in Q1 and Q2 2023.
Alphabet’s AI chatbot, Bard, now scans websites to verify responses, enhancing user trust. Wedbush considers Alphabet a major AI player, with Bard poised to generate revenue, possibly through user charges. Bard usage nearly tripled from April to May, indicating user satisfaction. Alphabet is also working on an AI tool, Gemini, capable of reading and summarizing text and code composition.
Bet Your Money on GOOG
Alphabet is aggressively competing in the cloud market with Google Cloud as the third-largest provider, growing quickly thanks to its data analytics prowess. While the division is not yet profitable, Google is poised to enhance profit margins and achieve profitability, making GOOG stock an attractive long-term investment.
On the date of publication, Chris MacDonald did not have (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.
