GOOG News
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Reporting tonight. I think it will be a record:
Consensus: ~$117B revenue and ~$2.88 EPS.
I expect: ~$120B revenue and ~$3.10 EPS.
I expect Google Cloud growth of 65–70%.
AI capex. I expect another increase. Something north of $100B annualised, $25B next Q+.
I expect HBM memory to get a shout outNet Income from operations circa $37B +$20B unrealised gain from investments.
NB- The above is operational. In addition they will likely report a circa $20B gain on SpaceX mark to marketThe headline might state $5 ish-if it does that include the revaluation of the SpaceX holding.
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Estimated growth in Google Cloud Platform (GCP). This is a 30% boost to company wide earnings. If this proves correct-it's huge and there is no denying how impressive the actual growth has been. A 4X increase in growth run rate.
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And, as usual, there's a chunky dip in GOOG share price immediately after good results.
I think I'm learning something about this game in that I come to expect this, but still don't understand why it happens. Is anyone able to explain this (using small words)? Thanks!
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And, as usual, there's a chunky dip in GOOG share price immediately after good results.
I think I'm learning something about this game in that I come to expect this, but still don't understand why it happens. Is anyone able to explain this (using small words)? Thanks!
@2BToo two words: Retail Investors (in my small mind anyhow)
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Because the market is obsessed with capex spending. GOOG is spending ALL their money and more(borrowing+capital raising) to fund their AI aspirations. They are generating record earnings, have a massive backlog and clear blue-sky ahead as evidenced in the above post. They have $514 billion in outstanding contracts to supply compute-what are they expected to do. Turn the business down? Of course they need to perform on those contracts and to do so they need to spend a lot of money to build the capacity to service these customers.
If the market doesn't like it 'today' they will, imo, wish they had, 'tomorrow'
NB-and despite the backlog being staggeringly huge, they are expected to add another $250B in the near term whilst delivering on that RPO in the 100B+ range at least over the same period.
As we have discussed previously, based on what Nvidia and TSMC and MU (10s of large companies) are saying(and doing). The AI factory build out will take another 5-8 years and then need maintaining. I've posted many slides showing 2027 is 50% over 2026 capex spending. It's accelerating. If stockholders don't like it, don't buy the stock only to be surprised when they spend more. It's happening. The companies are being completely transparent so it beggars belief that it surprises anyone.
The entire global supply chain is firing on all cylinders and has been for 18 months. And in the back ground are the FUD peddlers, pumping out articles to manipulate the naive into thinking it has peaked, it makes no money, Nvidia have chip problems, China is coming blah blah. It's all nonsense.
Anyone remember the 'Dean of valuation-the prof' 3 years ago he said Nvidia was worth $4 when the stock was trading at $24 and all the evidence suggested it was going higher. How many people did he induce to sell.
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And, as usual, there's a chunky dip in GOOG share price immediately after good results.
I think I'm learning something about this game in that I come to expect this, but still don't understand why it happens. Is anyone able to explain this (using small words)? Thanks!
And, as usual, there's a chunky dip in GOOG share price immediately after good results.
I think I'm learning something about this game in that I come to expect this, but still don't understand why it happens. Is anyone able to explain this (using small words)? Thanks!
I’ve probably mentioned before, but I spent over 20 years with a ‘unicorn’ US company….& it never failed to perplex me how we could have a stunning quarter and the. watch the share price immediately dip, or a poor to average one & see things rise 🤪
No logic! -
Because the market is obsessed with capex spending. GOOG is spending ALL their money and more(borrowing+capital raising) to fund their AI aspirations. They are generating record earnings, have a massive backlog and clear blue-sky ahead as evidenced in the above post. They have $514 billion in outstanding contracts to supply compute-what are they expected to do. Turn the business down? Of course they need to perform on those contracts and to do so they need to spend a lot of money to build the capacity to service these customers.
If the market doesn't like it 'today' they will, imo, wish they had, 'tomorrow'
NB-and despite the backlog being staggeringly huge, they are expected to add another $250B in the near term whilst delivering on that RPO in the 100B+ range at least over the same period.
As we have discussed previously, based on what Nvidia and TSMC and MU (10s of large companies) are saying(and doing). The AI factory build out will take another 5-8 years and then need maintaining. I've posted many slides showing 2027 is 50% over 2026 capex spending. It's accelerating. If stockholders don't like it, don't buy the stock only to be surprised when they spend more. It's happening. The companies are being completely transparent so it beggars belief that it surprises anyone.
The entire global supply chain is firing on all cylinders and has been for 18 months. And in the back ground are the FUD peddlers, pumping out articles to manipulate the naive into thinking it has peaked, it makes no money, Nvidia have chip problems, China is coming blah blah. It's all nonsense.
Anyone remember the 'Dean of valuation-the prof' 3 years ago he said Nvidia was worth $4 when the stock was trading at $24 and all the evidence suggested it was going higher. How many people did he induce to sell.
@Adam-Kay thanks - that's a helpful explanation. And tells of illogical behaviour.
If this is the case then surely there is a massive buying opportunity whenever a well-run company posts results which show big CapEx?
- Well run - so worth investing in.
- Big CapEx - so building for the future.
- Share price drop - due to illogical behaviour from investors.
Is now the time to load up on GOOG?
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Hi O,
I think if they are spending to deal with unmet need, and that is being sold at considerable profit (30% margins) then you look at overall growth and this segments contribution to EPS. Cashflow matters in the long term but to dismiss capex spending when the spend is building a capital intensive business(profitable) makes no sense to me.
Google is gigantic so one wouldn't ordinarily buy the entire business just because of one blockbuster, rather you'd weigh the contribution. Fundamentally, and a rather simplistic view, they are growing their entire business at a similar clip to their multiples. And not only that, they are increasingly becoming much more than search/advertising-if you go back a few years we discussed this very point.Referencing 'value', margin of safety and attractiveness, you only need to look at Cloudfare/Palo Alto et al to see growth rates of 15% and sky high multiples(100/150+) vs a company like GOOG with 20%+ growth rates and multiples sub 25.
Investing is about relativity. Where is my capital best deployed given a certain risk profile which I am willing to accept.
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Google's Earnings: Look Beyond the Headline 'Miss'
Alphabet's Q3 results were widely described as an earnings miss, but that headline obscures an exceptional underlying performance. A substantial part of the EPS shortfall arose from an approximately $11 billion non-cash mark-to-market loss on its SpaceX investment, rather than deterioration in Google's operations. Adjusting for this still leaves a modest earnings miss, but tells a very different story. Again caused by +$3B depreciation on the exceptionally large AI investment which is unavoidable.
Group revenue increased 25% to $127.6 billion, while operating profit surged 30% to $40.6 billion.
The standout was Google Cloud. Revenue exploded 103% year-on-year to $30.7 billion, while operating profit more than tripled to $11.1 billion. Operating margins expanded dramatically from 23.7% to 36.2%.
Even more remarkable is Google's $561 billion Cloud backlog, with management expecting over 55%, or approximately $309 billion, to convert into recognised revenue within just 24 months. This is the real headline, 'an extra 154B revenue(annually!) over the next 24 months'.
That's extraordinary forward revenue visibility, with demand continuing to outstrip available AI infrastructure capacity.
Google reaffirmed approximately $200 billion of capital expenditure for 2026 and expects significantly more in 2027. The market still doesn't like it. I take an opposite view.
The market sees spending risk. I see a business doubling Cloud revenue, expanding margins and investing aggressively to satisfy enormous contracted demand.
For AI infrastructure suppliers, the implications are exceptionally bullish.
Samsung reported last night-another record, $80B in operating income, they stated their HBM4 is sold out through 2027 and they achieved the highest prices in the sector with customers still wanting more. DRAM +20% QoQ ASP rises.
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Didn’t a certain chap called Warren buy a few shares earlier this year
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Yes-Berkshire hold almost $40B in GOOG/L-all acquired between Q2 and Q3 2026. It represents about 13% of their entire Equity portfolio