Transcript
Female Host
Well, joining us now to talk more about Alphabet, which is up 4.5% right now, is Rohit Kulkarni, Senior Research Analyst at Roth MKM Partners, along with Chris Ballard, Managing Partner at Check Capital Management and an Alphabet shareholder. Great to have you both here. Chris, as a shareholder, I'm going to start with you. Your takeaways from what we've gotten from Alphabet today, including this color regarding growth and engagement, growth in users around its AI-enabled search.
Chris Ballard
Great. Thanks for having me, Morgan. Yeah, so I haven't been able to go into all the details now as their call is live right now, but we're not, as long-term shareholders, we're not surprised that they're going to continue to gain momentum with regards to their AI and their user base. On something like their YouTube, they have 2.5 billion users per month on YouTube, which is the most streamed video in the world. So yeah, they have a lot of benefit to being in this AI generation and the changes that are going on right now. We're really pleased with the position that they're in right now. We know that they have the likes of Chat GPT and Perplexity kind of nipping at their heels, but they still retain the number 1 dominance by far. And that's for a reason. We all love using Google. That's why we're shareholders. We use it every day. I know I do whether to find small businesses, or to find my way somewhere on a map. So they have tons of data that they continue to collect, billions and billions of data every single day from all the searches that are done through their search as well as through YouTube and through their devices as well. So yeah, with their Gemini rollout that they put out last year, it's been really delivering well. If you do a search right now, you'll see that Gemini search populating now, which looks a little different. And it makes sense that people are staying on there a little longer these days with that.
Female Host
Rohit, want to get your thoughts on what we've gotten from Alphabet from the call so far and in terms of the numbers. We had a hiked dividend. We had a boosted buyback. Cloud was in line. YouTube was in line. Search, though, perhaps outsized focus there, including on margins.
Other Guest
Yeah, I think exactly what you said, Morgan, in line quarter. And I think the biggest question mark is always when do we start to see cracks in search? People have been waiting for that and we haven't seen any cracks in search develop in the last 12 months or even since ChatGPT was launched. So that's Google, on the other hand, is probably one of the biggest show me stories of our generation, where they are undergoing a dramatic change in technology, how internet search is going to evolve. And yet we are not seeing any changes to how the gatekeeper of internet, that is Google, has changed its economics. So I think what we are seeing so far is a big positive and Google continues to trade at a discount to all of the mega caps no matter which mega cap you look at Google is the cheapest mega cap right now and we are not yet seeing any cracks through search YouTube cloud and hey they also got quantum they got Waymo there are so many things going on so yeah.
Male Host
Chris, going back to cloud, we talk about AI as a threat to search, but the cloud business and Google's position as a hyperscaler used to get a lot more attention before we got used to talking about AI all the time. How important is Google Cloud's growth rate to your expectations for the value of Google?
Chris Ballard
Yeah, Google Cloud is basically number one or number two for us of what we're looking at at all times. We want that to continue to execute on an ongoing basis here, and they are. So it looks like last quarter, it was about $12.3 billion or so in revenue. They're generating over $2 billion of earnings off that business. And what we really want to see, what we continue to see is the margin expansion. So I don't know what that number is today, but it was 18% with their margins last quarter. And the likes of Apple and Amazon, their cloud business and Microsoft tend to have margins more like 30%. So as they continue to get scale, we believe that they will not only continue to grow revenues at the pace that they've been growing them as well as earnings, but that that margin will also expand creating cash at the bottom line for shareholders.
Male Host
Okay. And Rohit, how much does the TikTok outcome matter to YouTube? In our terms, a little bit. I think in the near term, probably it's a good tailwind for YouTube with engagement, not so much with the monetization. So it's a small positive. I think a bigger positive is just the macro and what we can hear from management about April and any trends post-tariff liberation day as such.