Samantha LaDuc
Founder & Strategist of LaDucTrading, Cross-Asset Analysis
Alphabet's beat looks as good as it gets, and the reaction matters more than the beat; the short target is $328.83. Per @HedgieMarkets, $6.26 of the $9.11 EPS came from paper gains on its Anthropic stake, leaving operating EPS near $2.85; free cash flow turned negative for the first time in its history, long-term debt more than doubled and buybacks fell to zero. Negative free cash flow now hurts Alphabet more than it helps, while its extra $15 billion of capex helps other companies. x.com x.com x.comÂ
Alphabet's search business will inevitably be cannibalized by AI, and search is its core advertising revenue driver. Google can pivot, but Meta will always have social networks people depend on to feel connected, making Meta the easier choice. x.comÂ
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.comÂ
Alphabet's search monopoly faces a different competitive game as agent companies build their own search tools. Google Cloud grew 103%, but that was not enough to offset disappointing ads growth. Its only path is to accelerate AI training and keep spending on capex. Search will never be the same, and the risk-reward has changed, though Alphabet remains an optimistic prospect. x.com x.com x.comÂ
Alphabet's lagging AI lab undermines the case for owning it for ANT exposure. The semiconductor-business framing does not make up for that lag, and hyperscalers are no longer needed for this exposure. x.comÂ
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.comÂ
Alphabet's vertical integration and moat make its current valuation attractive. Its forward P/E is 19.78, below the 22.51 median shown since 2019. Alphabet is also valued below Tesla and SpaceX combined, despite the chart showing Google's quarterly revenue far exceeding theirs; that comparison does not add up. x.com x.comÂ
Alphabet offers attractive risk/reward because its earlier equity raise suppressed the shares despite strong growth. The $80B-plus raise should suffice for now; another next year is uncertain. Search grew 17% in the prior results, while cloud revenue more than doubled in the latest. Investment losses, not the business, hit EPS; weaker free cash flow puts investors off. A search slowdown would be a warning flag, though Gemini and other businesses could soften the blow. x.com x.com x.com x.com … Show more
Alphabet looks weak because its Search & Other revenue missed expectations, casting doubt on the earlier search-strength case. Search & Other brought in $63.35B versus $64.85B estimated; Google Services, YouTube ads, total revenue and operating income also missed, while Cloud beat. x.comÂ
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.comÂ
Increasing AI spending looks set to weigh on Alphabet shares. Cash-flow burn is the key reason to expect a post-earnings decline. x.com x.comÂ