Google Q1 results: ‘one of the best ways to invest in AI’

on Apr 25, 2023

Alphabet Inc (NASDAQ: GOOGL) is trading up in extended hours after reporting better-than-expected results for its first financial quarter.

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Google just announced a $70 billion buyback

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Shareholders are also cheering $70 billion in share repurchase that Google authorised today.

The tech behemoth is reportedly working on an AI-powered search engine, code-named Magi. According to Gene Munster – Managing Director of Deepwater Asset Management:

It’ll be a near-term downdraft in monetisation with search. Our guess is search is negatively impacted by 5.0% over the next couple of years. But ultimately, it’ll power higher. Less clicks but more ARPU per search. It’ll be a net positive.

CEO Sundar Pichai also reiterated today that artificial intelligence will play a pivotal role in the company’s immediate future.

Munster shares his view on Google stock

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Year-to-date, Google stock is up nearly 20% at writing but Munster is convinced it has more room to run. On CNBC’s “Fast Money”, Munster added:

Google is one of the best ways to invest in AI over the next five years. We own Google, we want to buy more. There’s this trough we’re navigating through ahead of what will be a great outcome for AI and Google.

He expects the multinational to lower its headcount further moving forward that’ll also help on the cost side and be a possible catalyst for the share price.

Google Q1 financial highlights

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  • Net income printed at $15.05 billion versus the year-ago $16.44 billion
  • Per-share earnings also declined a little bit from $1.23 to $1.17
  • Revenue increased nearly 3.0% year-over-year to $69.8 billion
  • FactSet consensus was $1.08 a share on $68.9 billion in revenue
  • $11.72 billion of traffic acquisition costs (TAC) were less than expected

Other notable figures in the earnings report

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Total advertising revenue came in at $54.6 billion – ahead of $53.7 billion expected and down only marginally from last year. YouTube contributed $6.69 billion to the ad sales in the recent quarter.

Other notable figures in the earnings press release include $7.45 billion in Google Cloud revenue that missed Street estimates by $40 million.

Wall Street sees upside to $124 in Google stock on average that signals a possibility of another 20% gain on top of the after-hours price action.

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