Alphabet Earnings Preview: AI Competition, Guidance Concerns, and YouTube

Alphabet's Upcoming Earnings Report

• 📈 Alphabet, along with Tesla, is set to report earnings after the market close, with analysts anticipating solid results for the current quarter.
• 💰 Expectations are for 15% EPS growth and 11% revenue growth for the quarter being reported.

Concerns Over Future Guidance

• ⚠️ A key concern is Alphabet's guidance for the next quarter, with consensus estimates showing a significant slowdown to 7% year-over-year EPS growth.
• 📉 This pedestrian growth figure suggests a potential whimper for 2025 if not addressed, indicating possible structural issues.
• 🎯 The company needs to present a strong AI winning narrative to investors, which has been lacking so far.

The AI Competition Landscape

• 🤖 Google Search is perceived to be losing ground to large language models like Perplexity AI, ChatGPT, and Grok.
• ⚡ This is viewed as a long-term structural issue, not just a short-term blip, with AI-native search gaining traction.
• 💡 Aggressive investment, potentially including acquisitions of AI platforms like Perplexity AI, is suggested to counter this trend.

Investor Expectations and Strategy

• 📊 Investors are closely watching for updates on YouTube and Waymo, especially given Tesla's robo-taxi trial.
• 💰 A critical factor for AI infrastructure investors is whether Alphabet will raise or sustain its $75 billion capex guidance for the year.
• 🚀 While some see the AI race as a PR issue, the speaker acknowledges that competitors are indeed taking market share and emphasizes the need for Alphabet to counter punch effectively.

Investment Stance

• 💼 The speaker, Paul Meeks, owns Alphabet stock with a low cost basis but has not added to the position recently, indicating a cautious approach despite acknowledging the company's management.