Alphabet财报云业务超预期但搜索增长不及预期

Give me a sense here, Scott, as to why we're seeing this type of disappointment in the shares. I know it's just a knee jerk reaction, but is this about the idea that the company isn't transitioning fast enough? Well, it's a it's a rough quarter for the for the Alphabet narrative. The the cloud business was quite strong. It was up a 103%, well ahead of expectations, and margins beat expectations. But the weakness was really in the search business.

Estimates were for 15% growth. The company did 12. It doesn't explicitly guide to that figure, and it had a comp issue where it's lapping accelerating growth from last year. So that's likely a factor, but still it's about a 300 basis point miss in search. And also on that side of the business, margins missed as well. So, for those that think there's a longer term threat, you know, relating to AI, this definitely feeds into the narrative, and I think that's the issue with the stock.

Well, Gabe, let me get a sense, though. I mean, just hypothetically, once they do get up a little bit more up and running with regards to Gemini search or whatever we're gonna be calling it here, is that... Does that have the potential to be a product that can bring that not only the same type of growth that search brought and and now on the revenue side, but more importantly, on the profitability and margin side? Sure.

I mean, even 12% gross... Growth on the on the surface is is great growth for the the maturity that that search business is. But it's an expectations miss, and you have these very significant reactions in in the stocks relating to AI, you know, based on AI winner, AI loser in any point in time. So I do think Alphabet's already been building in AI overviews. Gemini, you know, has had very good model updates recently. What I think ends up happening is the model companies all kind of find their niche in the world where they're better than their competitors.

The challenge for Alphabet is it used to be the only player, you know, in in terms of searching for information. Now it's one of a few players, and I think that normalization is something that, you know, can be multiple compressing to a company like Alphabet. But I I don't really think this is, like, a structural issue. I think the growth rate off of these more difficult laps will stabilize around these levels. They, in fact, said that query volume growth was the fastest that it's been in the quarter, in the past five years.

So I'm sure they'll talk about that more in terms of the disconnect in terms of revenue growth versus the query volume growth in the quarter. So, Scott, you mentioned it's not a structural issue, but when I look at Meta's ad growth in the quarter, they grew 26%. Clearly, Alphabet is not growing, you know, same. It's it's less than half of Meta's growth. And they said, you know, query growth was the fastest in the last five years.

So what do you make of that? Right. And and I think Amazon's growth rate tomorrow for advertising will will be a good bit higher than than Alphabet's as well. I think that, I think that's what's happening whether it's Meta or the model companies, you know, themselves in terms of driving queries to to other, distribution outlets that Alphabet's... You know, it's normalizing competitively. But what what I think is comforting long term or why that this stock can work over the longer term is because the denominator is so much larger in terms of the number of queries that even though it's not the best player in the market, it's a very satisfactory player.

And when you add on top of that the success the company is now having in cloud, you know, you have a business that's, growing still 25% with mid 30% margin, that now trades under 20 times earnings. Do do you think they are missing an agent like News or Instinct here? And what would that do in in terms of, you know, the whole search situation? Certainly, they... There is a possibility that that Alphabet layers agentic on top of the model.

Like I said earlier, I do think that each one of the players, Anthropic, OpenAI, Meta, x AI, you know, find their niche in this, emerging world, you know, that we've we've headed into. And that with Alphabet, I think it's more about replacing the static Blue Link business with, the more interactive Gemini interface, than it is necessarily being the leading player in agentic commerce. But I'm certainly... They're sure that they will have a play there.

Well, I I am curious though too when we talk about the future going forward. And a couple of interesting headlines crossing the wire, Scott. One, basically saying that the company is now running at, in his words, a $500,000,000,000 annual run rate. But what I thought was also interesting was their cloud CEO is on the earnings call for the first time ever. And I am curious as to what, if at all, that actually signals about where Sundar Pichai's head is at.

Well, if you look at the relative strength of the businesses, the cloud business is doing significantly better than the search business. The search business just happens to have been, you know, probably the most dominant business model in the world up until, the emergence of AI. And so I think this company, you know, the the center of gravity is shifting a bit more towards cloud over time as the, the driving force of of the company, and that's, you know, represented with the, with, those that participate in the conference call.

And I think that's that's the signal right there.