Alphabet: Google Cloud Miss Isn't As Bad As It Seems - I'm Buying The Dip

Alphabet Inc. (NASDAQ:GOOGL) announced its Q4 and full-year 2024 earnings after the market closed on February 4. The results presented a mixed bag; while the earnings per share (EPS) marginally surpassed estimates, the revenue slightly fell short of expectations. This news, particularly regarding Google Cloud's performance, resulted in a more than 7% drop in the company's stock during after-hours trading.

Google Cloud's revenue growth saw a notable deceleration to 30% year-over-year. This growth rate missed analyst expectations, leading to concerns among investors. However, it's important to recognize that the decline in revenue did not indicate a lack of demand for services. Instead, it stemmed from capacity issues in meeting the high demand for cloud services.

Despite this setback, there is a silver lining. Google Cloud's operating income improved significantly compared to previous quarters, indicating that the company is managing its costs effectively even in the face of slower revenue growth.

One key aspect to consider is Alphabet's substantial capital expenditure (CapEx) investments. The company has heavily invested in artificial intelligence (AI) and infrastructure. While these investments may put pressure on short-term profits, they are crucial for maintaining a competitive edge in the market over the long term.

For investors looking at Alphabet's stock, the current dip presents a potential buying opportunity. The company's fair valuation, coupled with its ability to generate double-digit EPS growth in the future, makes the post-earnings decline an attractive entry point for long-term investors.

Alphabet, Google, Cloud