Alphabet Q2: AI Search & Cloud Doing Great, But Be Wary Of ROI On Big Capex Spends (Archive)

This 5-Minute Pitch was originally published on Seeking Alpha before the launch of the Hunting Alphas website. It is shared here to showcase my previous work and track record. New 5-Minute Pitches published on this site will not be disseminated anywhere else.

Elevator Pitch

• Alphabet's Q2 FY25 results reinforce my bullish stance, driven by AI-led growth in Search that is leading to strong user engagement and importantly, higher ad conversions.
• Google Cloud is showing signs of accelerated growth, evidenced by a surge in high-value deals and a robust backlog, supporting future revenue expansion.
• GOOGL stock remains undervalued versus peers and its own historical multiples.
• The relative technical charts in GOOGL vs SPX500 give me further confidence of continued outperformance and hence alpha generation potential ahead.
• Increased capex guidance comes at the cost of FCF margin dilution in the near-term. We need to be demanding proof of ROI via accelerated revenue growth in every call and interview with management.

Read the full article here.