Alphabet (GOOG -0.83%) (GOOGL -0.88%), a globally dominant corporation, is spearheading the AI revolution. Following the positive reception of its 2024 first-quarter financial results, the company’s shares have been on an upward trajectory, rising by 59% in the past year alone. With a current valuation exceeding $2 trillion, let’s delve deeper into its recent financial performance, appealing attributes, and stock valuation.
When analyzing the most recent figures, it is evident that Alphabet has exceeded expectations in terms of revenue and earnings per share. The company reported a top-line revenue of $80.5 billion, marking a 15% increase year-over-year, while the bottom line saw a significant 62% surge to $1.89 per share. These results underscore Alphabet’s consistent strong performance across all its business segments.
Notably, all of Alphabet’s divisions performed well, with ad revenue experiencing a 13% growth driven by robust performances in Search and YouTube. This positive trend is particularly encouraging considering the challenges faced by the ad industry in 2022. Alphabet’s Google Cloud division stands out as a standout AI stock, offering clients a wide range of AI capabilities in generative AI, machine learning, image and video analysis, data services, and consulting. With Google Cloud reporting a 28% revenue increase and an operating income of $900 million in Q1, it is establishing itself as a premier AI infrastructure provider.
It is not surprising that Alphabet has reached a $2 trillion valuation, considering its many favorable qualities. One of the key factors contributing to its success is the long-term tailwinds that have worked in its favor. The rise of smartphones and the internet has made Alphabet the gateway of the internet, allowing it to monetize internet usage through ads. Additionally, the popularity of streaming video has made YouTube a global entertainment powerhouse.
When it comes to AI, Alphabet is in a prime position to take advantage of its progress. With $95 billion in net cash and consistent free-cash-flow generation, the company has the financial resources to invest heavily in researching, developing, and launching AI tools. Furthermore, this tech company’s operating margin has averaged an impressive 26.2% in the past five years.
What sets Alphabet apart even more is its wide range of products and services that are used by millions, if not billions, of people. This provides the company with a valuable platform to release AI capabilities and drive greater revenue potential.
Despite its recent run-up, Alphabet’s stock still appears to be reasonably priced, with a forward price-to-earnings ratio of just 22.2.
