There’s a good reason Alphabet in late March 2025 is the “Magnificent 7” stock with the lowest price-earning ratio. Investors and analysts are worried about artificial intelligence impact on the search business that drives about 57 percent of Alphabet’s total revenue, based on advertising revenue generated by the 90-percent share Alphabet holds in the search market.
In its fourth quarter 2024 financial report, Alphabet reported Google Search revenue at $54 billion (up 12.5%); YouTube ads at $10.5 billion (up 13.8%); Google Network at a bit under $8 billion (down 4.1%); Google subscriptions, platforms and devices at $11.6 billion (up 7.8%); Google Cloud at about $12 billion (up 30%).
The issue is not so much that Google Search is failing to grow: it is growing. The fear is that AI could halt or reverse that growth. Equity markets being forward looking, growth expectations really do matter.
And virtually nobody disputes the notion that AI is going to cannibalize some amount of search volume. Just how much is the issue.
So investors will be looking for growth in other areas, ranging from YouTube ad revenue to Google Cloud services to robo taxis.
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