Recent news about a potential Chrome spinoff has impacted Google’s stock. A bull case for Google (Alphabet) can still be made by highlighting its diversified and growing business segments, especially those leveraging its strong AI capabilities.
10 high-level points summarising the bull case for Alphabet:
Accelerating Financial Performance: Alphabet shows robust and accelerating revenue growth, with significant expansion in operating and net profit margins, and strong diluted EPS increases from 2022 to 2024.
Alphabet Inc. Consolidated Financial Performance (2022-2024)
***All figures in Millions of $***| Reveue | Operating Income | Net Income | Operating Margin | Net Income Margin | EPS | |
|---|---|---|---|---|---|---|
| 2022 | $282,836 | $74,842 | $59,972 | 26.5% | 21.2% | $4.56 |
| 2023 | $307,394 | $84,293 | $73,795 | 27.4% | 24.01% | $5.80 |
| 2024 | $350,018 | $112,390 | $100,118 | 32.1% | 28.6% | $8.04 |
| YoY Growth 2023 | 8.68% | 12.63% | 23.05% | +0.9% pts | +2.81% pts | 27.2% |
| YoY Growth 2024 | 13.87% | 33.33% | 35.68% | +4.7% pts | +4.59% pts | 38.6% |
Google Cloud Profitability Surge: The Google Cloud segment has dramatically transitioned from operating losses to substantial profitability and sustained high growth, becoming a key driver of Alphabet’s overall financial health.
Unparalleled AI Leadership: Alphabet boasts an unmatched “full-stack” advantage in AI, with proprietary hardware (TPUs), world-class research (AlphaFold), and deep integration of AI models (Gemini) across its core products.
Diversified Revenue Streams: Beyond core search ads, strong growth from YouTube advertising and the Google Subscriptions, Platforms, and Devices segment (e.g., Google One, YouTube TV) creates stable, recurring income.
Robust Economic Moat: The company maintains a wide economic moat, characterised by its dominant 92% share in the global search engine market, powerful network effects, strong brand recognition, and unparalleled data advantage.
Significant R&D Investment: Alphabet consistently invests heavily in research and development, committing billions to innovation, particularly in AI, ensuring its continued technological leadership and future growth avenues.
Strategic “Other Bets” Ventures: Long-term investments in high-potential areas like autonomous driving (Waymo, with rapid growth in paid trips) and AI-driven healthcare solutions (Verily) signal future diversification and market opportunities.
Manageable Chrome Spin-Off Risk: While the potential Chrome divestiture is a regulatory concern, its long-term impact is assessed as mitigated, given Chrome’s deep integration with Google’s broader ecosystem and the shifting competitive landscape towards AI.
Strong Financial Resilience: Alphabet’s robust balance sheet, holding over $95.7 billion in cash and marketable securities with low debt, provides significant financial flexibility to navigate potential market or regulatory disruptions.
Overall Compelling Investment: The combination of strong financial results, dominant market positions, leadership in AI, and strategic future investments positions Alphabet as a highly attractive and compelling investment opportunity despite ongoing challenges.
