4. Alphabet Inc. (NASDAQ:GOOGL)
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL) is a multinational conglomerate holding company that operates through Google Services and Google Cloud segments. It is a Magnificent Seven company and one of the best technology stocks to buy for the long term.
Alphabet Inc. (NASDAQ:GOOGL) was held by 216 hedge funds in Q2 2024 with total stakes worth $35.31 billion. Fisher Asset Management is the top shareholder of the company with position worth $8.86 billion.
The major growth engines of the company, advertising and cloud computing are growing at a steady pace. Moreover, the company is exercising its competitive edge by leveraging its AI infrastructure. During Q2 2024, its cloud segment revenue crossed the $10 billion mark for the first time and also delivered more than $1 billion in quarterly profits. Generative AI solutions for cloud customers, which are already being used by over 2 million developers resulted in record revenue for the segment.
Moreover, the Google Services segment revenue also increased 12% year-over-year to reach $73.9 billion for the quarter, driven by a 14% growth in search and other services revenue. This segment contains 6 major products that are used by more than 2 billion users monthly. Here as well Generative AI solutions proved to be detrimental in driving increased Google search volumes. CEO Sundar Pichai mentioned that despite concerns that Google might lose its search market share to OpenAI, the company’s generative AI increased user satisfaction with the results.
The competitive edge of Alphabet Inc. (NASDAQ:GOOGL) lies in the fact that it is one of the biggest digital advertisers and public cloud, leveraging AI expertise to drive significant revenue growth and profits. During the quarter the company was able to generate $23.6 billion in net income and delivered a free cash flow of $31.5 billion, indicating robust liquidity.
If we look at its 10-year performance, Alphabet Inc. (NASDAQ:GOOGL) has been growing its revenue by 18%, net income by 21%, and has improved its levered free cash flow by 22%. Analysts expect its earnings to grow by 32% during the year, while the broader market average sits at 4.2%, making it a lucrative opportunity for growth investors.
Patient Capital Opportunity Equity Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
