META - Here's Why Google Fell Despite The Q2 2024 Earnings Outperformance

2024-07-24 11:39:28 ET

Summary

• Google continues to be well-positioned in the AI play, with robust Q2 results in its core Search advertising business and persistent momentum in Cloud monetization.
• The latest earnings outperformance continues to assuage previous concerns about AI-driven cannibalization of Google's search dominance, and reinforces its reputation in actively monetizing the nascent technology.
• However, the stock's post-earnings response continues to highlight the increasing disparity between Google's fundamental outlook and its valuation premium at current levels.

Google ( GOOG / GOOGL ) has been one of the biggest gainers this year, alongside digital advertising peer Meta Platforms ( META ). Previous concerns over potential cannibalization of Google’s online search dominance with the advent of generative AI tools like OpenAI’s ChatGPT have largely subsided. Google’s continued demonstration of resilience at its core search advertising and Google Cloud segments are also buoying the stock’s upsurge towards all-time highs. The company’s recent roll-out of AI Overviews to supplement native search results on Google is also in line with our previous expectations for further monetization of Search Generative Experience (“SGE”) developments. This was evident in the sequential acceleration in Google Search & Other revenue growth during Q2, which expanded at +5% q/q to $51.1 billion, despite softness in seasonality....

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