Dray
Finance Student, Stock Investor, Technology & Business
Alphabet's accelerating cloud growth makes the post-earnings selloff look like a massive overreaction. Google Cloud revenue rose 103% year over year in Q3; total revenue grew 25%, and Gemini exceeded 1 billion monthly active users. Even negative free cash flow in the short term would not outweigh that cloud growth. x.com x.com
Alphabet's earnings growth makes its valuation look attractive. It trades at 21x forward earnings and a 0.47 PEG while EPS grows 34% year over year; shares are down almost 9% year to date. Search still grows 12% and Cloud grows 103%, undercutting the concern that Search will sink the business. x.com x.com
Alphabet's 103% year-over-year cloud growth makes its roughly 10% overnight stock drop hard to understand. That growth matters more here than what the rest of the company is doing. x.com
Alphabet's earnings weakened the investment case because it missed on YouTube, Search, services, subscriptions and earnings, while reporting $0 in buybacks and double the negative free cash flow of last quarter. Cloud revenue was impressive, but Alphabet is a hold here and needs to come down significantly before adding. x.com
Alphabet's core Search growth is slowing while AI spending surges, making the selloff look deserved despite fast Cloud growth. Search growth fell from 19% to 17% to 12% over three quarters; Search now represents just under half of revenue. The stock could fall to $250, though Amazon is the preferred buy. x.com x.com x.com x.com x.com
Alphabet's business is bigger and more profitable across the board, while its stock is back at its March war-scare low. That makes it hard not to pour all future earnings into the stock. Quarterly revenue rose from $110B to $128B; Google Cloud growth accelerated from 63% to 103%, with $30.7B in quarterly revenue, an operating margin around 36% and profit more than tripling in a year. Search queries are growing at their fastest pace in five years. x.com
Alphabet's surging AI capex is outpacing its payoff. Its first double earnings miss in four years came with free cash flow of -$9.1 billion versus -$2.7 billion expected, long-term debt up 479% in a year to $125.1 billion, and guidance for significantly higher 2027 capex above $300 billion. x.com x.com
Alphabet remains fundamentally strong because revenue rose 25%, Cloud grew 103% to $30.7B with record margins, and search queries reached a five-year high. Ads grew 12% instead of 17% expected, while 2027 capex rises again, so the market is repricing it from a cash-printing ad company into an AI spender. x.com
Alphabet's businesses beyond search are why it will lead the real AI boom. Google Cloud, DeepMind and Waymo broaden its reach, and its $900 million SpaceX investment is now worth $85 billion. Fear emerging as the shares fall is an opportunity; a decline toward the buy zone is welcome, even as Q3 capex has taken a large hit out of free cash flow. x.com x.com x.com x.com
Alphabet's AI capex payback is being repriced, making its post-earnings decline more than a one-day mood swing. Guidance and cloud and AI margin commentary are the near-term tests. If growth continues but the multiple compresses, the risk is duration in mega-cap AI, not a collapse in technology growth. x.com
Alphabet's Cloud profits offset some Search risk, but AI infrastructure may consume the gains. Search grew 12% versus 17% in Q2 despite five-year-high query growth; currency and comparisons also mattered. Cloud profit reached $11.1B, but TPU sales may alter margins. Operating cash lagged capex and shares were issued. The stock looks interesting, not obviously cheap; over two to four reports, Search monetization and Cloud margins must hold and cash flow must outpace capex without more dilution. … Show more