Alphabet GOOGL is tapping into AI to draw in new clients, secure bigger contracts, and enhance product use among existing customers. The company is incorporating AI features into its Google TV devices using the Gemini models.
The upcoming AI enhancements, expected to launch later this year, will make it easier for users to interact with Google TV. Now, users can ask questions about topics like “travel, health, space, history,” with videos provided for added context in the search results.
Alphabet has been introducing new features to Google TV, the latest being the Google TV Streamer, which acts as a control center for compatible smart home devices. Additionally, a new sports page has been added to the For You tab, aggregating all sports content in one area.
AI Innovations Boost GOOGL’s Growth
Alphabet’s Gemini models are utilized by over 2 billion users monthly across various products and platforms. This model comes in four different sizes, offering flexibility and efficiency, operating smoothly from data centers to personal devices.
GOOGL has constantly improved its AI capabilities by frequently updating its models. In December, the company introduced Gemini 2.0, its most sophisticated model that drives AI agents.
Another advancement is PaliGemma 2, GOOGL’s latest version of the tunable vision-language model (VLM), enhancing the company’s AI presence. This model can interpret visual data effectively. It can read extensive captions and generate detailed, context-rich descriptions for images.
Revamping Search and Cloud Services with AI
GOOGL is committed to investing in cutting-edge infrastructure to bolster its global AI initiatives. Currently, over 25% of new code at Google is generated by AI, enhancing the coding process.
The integration of Generative AI (Gen AI) with Google Search is yielding positive outcomes. Large Language Models combined with multi-search and visual exploration features continuously improve search results.
New AI features like AI Overview, Circle to Search, and advanced options in Lens are elevating user experiences. AI Overview alone reaches over 1 billion users monthly, showcasing strong engagement levels. The embedding of ads within AI Overviews also signals potential for increased revenue.
Circle to Search is accessible on over 150 million Android devices, aiding users in shopping, translating text, and exploring knowledge. Lens has gained traction as the fastest-growing query type, facilitating product discovery.
GOOGL is enhancing Pixel’s features using AI and Gen AI. The devices are equipped with Google Tensor G4 chips, which support the Gemini Nano with Multimodality, the company’s latest on-device AI model.
Maintaining Competitive Edge with AI
In the competitive cloud market, Google Cloud is firmly positioned as the third-largest provider, following Amazon’s AMZN cloud service, Amazon Web Services, and Microsoft MSFT Azure.
Strong demand is benefiting Alphabet due to its innovative AI infrastructure. GOOGL offers various AI accelerator options, including different types of NVIDIA NVDA GPUs and custom-designed TPUs.
Enterprise AI platform Vertex is quickly being adopted, with companies integrating it with BigQuery for accurate, real-time decisions. In the past six months, machine learning operations within BigQuery have soared by 80%, fueled by this rising demand.
Despite competition in the cloud and AI spaces, GOOGL has seen a 38.7% return over the last year, outperforming both the Zacks Computer & Technology sector and Microsoft, but trailing Amazon. In comparison, the sector posted a return of 37.7%, with MSFT and AMZN experiencing gains of 12.4% and 46.7%, respectively.
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Currently, GOOGL shares are trading above both the 50-day and 200-day moving averages, indicating a positive trend.
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Earnings Estimates Steady for GOOGL
The Zacks Consensus Estimate for first-quarter fiscal 2025 revenues stands at $75.86 billion, reflecting a year-over-year growth of 12.24%.
For earnings, the consensus anticipates $2.03 per share, unchanged in the last 30 days, indicating a 7.41% increase compared to last year.
Alphabet has consistently surpassed the Zacks Consensus Estimate in the last four quarters, with an average surprise of 11.84%.
Alphabet Inc. Price and Consensus
Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote
Discover the latest EPS estimates and surprises using Zacks Earnings Calendar.
GOOGL Stock Valuation Concerns
With a Value Score of C, Alphabet appears to be experiencing a demanding valuation phase.
Currently, Alphabet stock is trading at a premium, with a forward 12-month Price/Sales ratio of 7.23X, while the industry average stands at 6.04X.
Price/Sales Ratio (F12M)
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GOOGL Stock: Buy, Sell, or Hold?
Alphabet’s expanding GenAI capabilities may position it well for future growth, even amidst fierce cloud competition and regulatory scrutiny. Its prominent role in the search engine market and robust cloud presence are significant long-term growth factors.
Nonetheless, Alphabet faces growing regulatory challenges and scrutiny concerning its search engine dominance. Allegations include the improper promotion of its search engine through Android. The company is involved in lawsuits related to data privacy, competitive practices, AI usage, and copyright issues in multiple countries.
Regulatory pressures and the potential for compelled restructuring by the U.S. government could impact its prospects. Additionally, competition from Microsoft and Amazon in the cloud space remains a challenge.
Currently, Alphabet holds a Zacks Rank #3 (Hold), suggesting that waiting for a more favorable entry point into the stock might be wise. You can view the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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