Ricardo Pillai
3 min read
In This Article:
We came across a bullish thesis on Alphabet Inc. (GOOGL) on Sergey’s Substack. In this article, we will summarize the bulls’ thesis on (GOOGL). Alphabet Inc. (GOOGL)'s share was trading at $166.18 as of 3rd June. (GOOGL)’s trailing and forward P/E were 18.55 and 19.23 respectively according to Yahoo Finance.
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Alphabet Inc. (GOOGL) posted stable +12% YoY revenue growth in Q1 2025, underpinned by strength in Cloud and Subscriptions, even as Search and YouTube growth moderated. Google Services remains the dominant segment with $77.3B revenue, driven by core products like Search and YouTube, while Subscriptions rebounded to +19% growth.
Google Cloud grew +28% YoY to $12.3B, with operating margin expanding to 17.8%, driven by infrastructure and AI products like Vertex AI and Gemini. CapEx surged to $17.2B in Q1, part of a planned $75B FY25 investment into AI and cloud infrastructure.
Google's moat remains exceptionally strong, reinforced by scale, network effects, IP, and switching costs. With 89.6% search share, 1.5B monthly users of AI Overviews, and deep developer engagement (4M+ Gemini devs), Google continues to dominate across multiple AI and digital fronts.
The acquisition of Wiz for $32B strengthens cloud security and aligns with Alphabet’s sovereign AI and enterprise strategy. Gemini 2.5 Pro leads in AI benchmarks, now embedded across 15+ products with 500M+ users, while Gemini DAUs hit 35M.
Financially, Alphabet improved margins across the board—operating margin rose to 33.9%, net margin reached 38.3%, and share dilution was well-managed with a 1.9% YoY reduction in outstanding shares. The company repurchased $15.1B in shares and paid $2.4B in dividends, signaling continued capital discipline. Alphabet’s TAM now exceeds $2.2T, spanning advertising, cloud, and AI.
Despite concerns around AI-driven disruption, Search remains resilient. With expanding AI monetization, infrastructure, and ecosystem control, Alphabet is positioned to sustain long-term growth and defend its competitive advantage.
Previously, we have covered Alphabet Inc. (GOOGL) in Jan 2025 wherein we summarized a bullish thesis by CharlyAI on Substack where in the thesis revolved rising AI competition threatening Google’s search dominance, but the 14% stock drop since then reflects disruption fears. The new thesis shifts focus to Alphabet’s AI monetization, strong Cloud growth, and deepening moat—reframing it as an AI infrastructure leader, not a lagging incumbent.
Alphabet Inc. (GOOGL) is on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 227 hedge fund portfolios held (GOOGL) at the end of the first quarter which was 234 in the previous quarter. While we acknowledge the risk and potential of (GOOGL) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an extremely cheap AI stock that is also a major beneficiary of Trump tariffs and onshoring, see our free report on the best short-term AI stock.
