Alphabet: Still Solid Growth in Q1; Just 20x 2024 EPS
Company Update (GOOG US) (Buy): Advertising and Cloud both continued to power ahead; we see macro risks but these seem priced in.
Highlights
Revenue grew 12%, EBIT grew 20% and EPS grew 49% in Q1.
Advertising and Cloud each had solid, though sequentially lower, growth.
Datapoints showed AI advances continue to be a tailwind for Alphabet.
Trump’s new tariffs will be a headwind and anti-trust litigation is ongoing.
At $163.85, we see 122% total return (24.4% p.a.) by 2028 year-end. Buy.
Introduction
We review our Buy rating on Alphabet after the release of Q1 2025 results on Thursday (April 24) evening.
Alphabet (Class C) shares rose 1.5% on Friday, but remain 5.7% lower than a year ago, underperforming the S&P 500 index by ~14 ppt over this period (excluding dividends):
Alphabet Class C Share Price (Last 1 Year)
NB. Class A shares have voting rights and the same economic rights as the non-voting Class C, but are typically cheaper. Source: Google Finance (06-Feb-25).
Alphabet has been a long-term core position for us. We initiated our Buy rating on Alphabet in January 2021 and have included it in our “Select 15” model portfolio since its inception at the start of 2023. Shares have gained 73.4% since our initiation and are showing an 82.1% gain in the model portfolio. (The price fell between late 2021 and early 2023.)
Q1 2025 results showed solid growth, again demonstrating Alphabet’s status as an AI winner. There was no material impact from macro headwinds. While this may change in Q2, Alphabet’s P/E is at just ~20x.
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