GOOGL Q4 FY12/23 Earnings Review
Question of the day - Has Alphabet lost its edge?
Alphabet's Q4 revenue grew by 13%, the strongest quarterly growth since Q4 2021.
Alphabet's profitability margins worsened.
We likely have put in a wave 5 top in the near term.
But what do we expect from the stock in the long term?
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Has Alphabet lost its edge?
by Yimin Xu
Investors point to the fact that Alphabet had enjoyed an early mover advantage in AI only to concede the lead to OpenAI/ Microsoft. This was because the large language models could essentially cannibalise Alphabet’s leading revenue stream, Google Search. If you can get all the answers from AI, there is a reduced need to spend time reading through a tonne of advertised, SEO-optimised junk from Google search results.
I believe, if the Alphabet management can get over the cannibalisation concern, Alphabet can potentially overtake OpenAI’s pole position quite quickly. And there is no reason why they can't get over it – Apple’s iPhone pretty much killed its iPod business but look at where they are now. Indeed, Alphabet is currently working on combining AI with Search (aka. Search Generative Experience) through Gemini.
The reason I see great potential in Alphabet’s AI capability is because of its unique access to an entire world of data across video (Youtube) and text (Search) formats. This data access is not something OpenAI can replicate.
Secondly, I am very bullish on YouTube, which generates both ad and subscription revenues. What’s unique about YouTube is that it combines long-form content, short-form content, music, and podcasts into one place. This works very well for capturing the audience screen time while serving up AI and Search. The only missing part is perhaps the inhouse content creation like Netflix and Amazon Prime. This does not seem to be their current focus as they are trying to compete in Shorts.
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