Alphabet’s GOOGL Google is gaining ground in the U.S. smartphone market thanks to strong shipment growth of its Pixel 9 devices. According to the latest report from Counterpoint Research, Google’s shipments increased 20% year over year in third-quarter 2024 courtesy of the earlier (August) release of the Pixel 9 series compared to the Pixel 8’s October 2023 release.
Google’s third-quarter shipment growth trailed only Motorola but was way better than Apple AAPL and Samsung, which saw a 2% and 13% decline, respectively. Overall, third-quarter U.S. smartphone shipments declined 4% year over year due to sluggish demand.
Alphabet announced the Pixel 9 series on Aug. 13 and launched the device along with Pixel 9 Pro XL on Aug. 22. Pixel 9 Pro and Pixel 9 Pro Fold were released on Sept. 4. Strong demand for Pixel 9 Pro XL has been a key catalyst as the device made the list of the top 10 premium smartphones sold in the United States.
The early release not only helped Google in smartphone shipment growth but also in grabbing market share. According to the latest StatCounter data, Google Pixel’s North American market share increased from 4.76% in September to 12.9% in October (14% when considered the U.S. market only).
GOOGL Pixel Benefits From Innovative AI Features
Alphabet is leveraging AI and Generative AI (Gen AI) to boost Pixel’s features. The devices run on Google Tensor G4 chips, which help bring the Gemini Nano with Multimodality, Google’s latest on-device AI model. Gemini assistant understands text, as well as images, audio and speech due to the multimodal models.
Google Tensor G4 is custom-built for Gemini and helps users browse the web 20% faster and launch apps 17% faster on average.
AI and Gen AI power Pixel’s photography and video capabilities, including Add Me and Plus Magic Editor features. Pixel Studio is a first-of-its-kind image generator powered by an on-device diffusion model running on Tensor G4 and Google’s Imagen 3 text-to-image model in the cloud.
Pixel Weather app uses AI to offer more accurate forecasts. Users can create lists in Google Keep with the help of Gemini. Call Assist uses AI to not only screen spam calls but also to wait on hold for users. This feature is now available on Pixel Watch 3.
Alphabet Stock Rides on Strong AI Demand
GOOGL shares have returned 4.1% in the past month, outperforming both the Zacks Computer & Technology sector and the Zacks Internet Services industry. Over the same timeframe, the sector and industry have returned 3.3% and 0.9%, respectively.
GOOGL’s One-Month Performance
Image Source: Zacks Investment Research
Alphabet is riding on strong demand for its AI and Gen AI services. Its Gemini models are currently used by more than 2 billion users monthly across products and platforms. Gemini comes in four sizes, forming a versatile model family that runs efficiently on everything, from data centers to devices.
GOOGL continues to invest in state-of-the-art infrastructure to support its AI efforts globally. It is leveraging AI to improve the coding process, and more than 25% of all new code at Google is currently generated by AI.
AI Improves Alphabet’s Search & Cloud Businesses
The integration of GenAI technology into the search engine is benefiting Google Search. Large Language Models, coupled with multi-search and visual exploration features, are continuously improving the search results.
New AI-powered enhancements, such as AI Overview, Circle to Search and advanced features in Lens, are improving user experience. AI Overview currently reaches more than 1 billion users monthly, and engagement levels are quite strong. The integration of ads within AI Overviews bodes well for Alphabet’s monetization efforts.
Circle to Search is now available on more than 150 million Android devices, with people using it to shop, translate text and learn more about the world around them. Lens has become the fastest-growing query type due to its ability to help in product discovery and shopping.
In the highly competitive cloud infrastructure market, Google Cloud has solidified its position as the third-largest provider against the likes of Amazon’s AMZN cloud arm Amazon Web Services and Microsoft Azure.
Alphabet is seeing strong demand due to an innovative AI infrastructure. GOOGL offers customers a range of AI accelerator options, including multiple classes of NVIDIA NVDA GPUs and custom-built TPUs.
Enterprise AI platform Vertex is gaining rapid adoption. Enterprises are combining Alphabet’s AI platform with data platform BigQuery to make accurate real-time decisions. BigQuery machine learning operation saw 80% growth over the past six months, driven by this strong demand.
Earnings Estimate Revisions Trend Higher for GOOGL
The Zacks Consensus Estimate for 2024 revenues is pegged at $298.73 billion, indicating 16.46% growth over 2023’s reported figure.
The consensus mark for 2024 earnings is pegged at $8 per share, up 4.6% over the past seven days, suggesting 37.93% growth from the figure reported in 2023.
Alphabet’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 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 is Overvalued
The Value Score of C suggests a stretched valuation for Alphabet at this moment.
Alphabet stock is trading at a premium with a forward 12-month Price/Sales of 6.35X compared with the industry’s 5.98X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
Here’s Why GOOGL Stock is a Buy
Alphabet’s growing GenAI capabilities present a potential catalyst for the future amid stiff competition in the cloud space and increasing regulatory headwinds.
GOOGL’s dominant position in the search engine market and strong position in the cloud are long-term drivers.
Alphabet currently has a Zacks Rank #2 (Buy), suggesting that it may be wise to enter the stock right now. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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