2024-01-30 17:50:04 ET
Summary
- Despite the Q4 double beat, Google's core ad sales came in under expectations, overshadowing continued resilience in Google Cloud.
- However, we turn to greater focus on challenges ahead in Google's ability in realizing AI opportunities. Underappreciated headwinds include regulatory scrutiny, delays in AI monetization, and shifting go-to-market partner dynamics.
- The combination is likely to weaken durability further in Google's valuation premium at current levels following its recent rally to record highs.
2023 saw an AI catch-up game for Alphabet Inc. aka Google ( GOOG , GOOGL ). While growth in its core search advertising business continued to reaccelerate, alongside maintained cloud resilience exiting 2023, ongoing uncertainties to Google’s artificial intelligence, or AI, opportunity remained an overhang on multiple expansion.
Admittedly, the advent of AI remains accretive to Google’s core businesses. In advertising, generative AI capabilities integrated across search and video ad creation to deployment directly addresses advertisers’ increasing demand for ad cost optimization and measurable performance. Meanwhile, in Google Cloud – particularly Google Cloud Platform (“GCP”) – increasing deployment of AI workloads is also driving cloud total addressable market, or TAM, expansion for the unit....
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Q4 2023 Review: Google's Overstayed Its Welcome In The Recent Rally