Google’s Pixel 9 Drives Impressive Growth in U.S. Smartphone Market
Alphabet’s GOOGL Google is making strides in the U.S. smartphone market, fueled by remarkable shipment growth of its Pixel 9 devices. A report from Counterpoint Research reveals that Google’s shipments grew by 20% year over year in the third quarter of 2024, thanks to the earlier release of the Pixel 9 series in August compared to the Pixel 8’s October release in 2023.
In this quarter, Google’s shipment growth surpassed only Motorola, while Apple AAPL and Samsung faced declines of 2% and 13%, respectively. Overall, U.S. smartphone shipments dropped 4% year over year, mainly due to weak demand.
Alphabet revealed the Pixel 9 series on August 13, launching the device alongside the Pixel 9 Pro XL on August 22. The Pixel 9 Pro and Pixel 9 Pro Fold followed with their release on September 4. The strong interest in Pixel 9 Pro XL significantly boosted Google’s performance, as this device was listed among the top 10 premium smartphones sold in the United States.
The early launch of the Pixel 9 series not only spurred shipment growth but also garnered a larger market share. Recent StatCounter data shows an increase in Google Pixel’s North American market share from 4.76% in September to 12.9% in October, climbing to 14% when focusing solely on the U.S. market.
Harnessing AI for Enhanced Pixel Features
Alphabet is capitalizing on AI and Generative AI (Gen AI) to enhance the features of its Pixel devices. The Pixel lineup is powered by Google Tensor G4 chips, which support the Gemini Nano with Multimodality, the latest on-device AI model. This innovative assistant comprehends text, images, audio, and speech.
The custom-built Google Tensor G4 enables users to browse the web 20% faster and launch applications 17% quicker on average.
AI innovations enhance Pixel’s photography and video features, introducing tools like Add Me and Plus Magic Editor. Pixel Studio serves as a groundbreaking image generator reliant on this technology. The Pixel Weather app uses AI to deliver precise weather forecasts, while users can also utilize AI in Google Keep to manage lists. A noteworthy feature, Call Assist, employs AI to filter spam calls and wait on hold for users—a function now available on Pixel Watch 3.
Strong Stock Performance Fueled by AI Growth
Over the past month, GOOGL shares have gained 4.1%, outperforming the Zacks Computer & Technology sector and the Zacks Internet Services industry, which reported 3.3% and 0.9% returns, respectively during the same period.
GOOGL’s One-Month Performance
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Alphabet experiences rising demand for its AI services, with Gemini models being utilized by over 2 billion users monthly across various platforms. The Gemini models come in four sizes, ensuring they operate efficiently across data centers and devices.
Continued investment in cutting-edge infrastructure underlines GOOGL’s commitment to enhancing its AI capabilities. Notably, more than 25% of all new code within Google is now generated by AI.
AI Technology Enhances Alphabet’s Search and Cloud Services
The integration of Gen AI into Google Search is yielding positive results. Improved large language models combined with multi-search and visual exploration capabilities are enhancing the search experience.
Recent AI enhancements, such as AI Overview, Circle to Search, and advanced features in Lens, are boosting user engagement. AI Overview reaches over 1 billion users monthly, with strong interaction rates—a promising factor for Alphabet’s advertising revenue.
Circle to Search is now accessible on more than 150 million Android devices, allowing users to shop, translate text, and discover information. Lens has emerged as the fastest-growing search type, particularly for product discovery.
In the competitive cloud services market, Google Cloud has established itself as the third-largest provider, competing with Amazon’s AMZN Amazon Web Services and Microsoft Azure.
With strong demand for innovative AI solutions, GOOGL offers clients a variety of AI accelerator options, including diverse classes of NVIDIA NVDA GPUs and custom-built TPUs.
Additionally, the Vertex AI platform is seeing rapid adoption as enterprises combine it with the data platform BigQuery for real-time decision-making advancements. BigQuery’s machine learning operations experienced an 80% growth in the last six months, driven by strong demand.
Upward Earnings Estimates for GOOGL
The Zacks Consensus Estimate predicts 2024 revenues at $298.73 billion, representing a 16.46% increase compared to 2023. For 2024, the earnings consensus stands at $8 per share, reflecting a 4.6% rise over the past week and indicating a 37.93% growth from the reported 2023 figures.
Alphabet has beaten the Zacks Consensus Estimate in all four previous quarters, with an average surprise rate of 11.84%.
Alphabet Inc. Price and Consensus
Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
GOOGL Stock Valuation Concerns
Currently, Alphabet’s stock shows a Value Score of C, indicating a potentially stretched valuation.
The stock trades at a forward Price/Sales ratio of 6.35X, compared to the industry average of 5.98X.
Price/Sales Ratio (F12M)
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Reasons to Consider GOOGL Stock
Alphabet’s expanding GenAI capabilities may act as a key growth driver in an increasingly competitive cloud landscape marked by regulatory challenges.
GOOGL’s stronghold in the search engine sector and its cloud service strength are significant long-term growth indicators.
With a Zacks Rank #2 (Buy), now could be a timely moment to invest in the stock. A full list of today’s Zacks #1 Rank (Strong Buy) stocks is available for review.
Zacks Identifies Top Semiconductor Stock
This company represents only 1/9,000th the size of NVIDIA, whose stock soared over 800% since our recommendation. Although NVIDIA still shows strength, our newly identified chip stock has significant potential for growth.
With robust earnings growth and a widening customer base, it is well-positioned to meet the soaring demand for Artificial Intelligence, Machine Learning, and Internet of Things solutions. Global semiconductor manufacturing is anticipated to rise from $452 billion in 2021 to $803 billion by 2028.
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