$GOOG · Financial Education · 2026-10-28

Look at Google MacDougall. Google MacDougall, ladies and gentlemen, is officially in collapse now. It has fallen by approximately 30% from its all-time high. Which he reached earlier this year.

Man, he's in complete collapse and is getting hit again after today's trading hours.

Google MacDougall, this is a stock from which I also made substantial profits. But this stock, as you know, has performed very well for us. We doubled our money in Google, the great old Google .

First, Google stock. Is it for buying or selling after these profits?

Well, Google McDougall, right? She says, "Man, the job is better than I expected." "I need to raise my revenue growth forecast by 1% and so on." Isn't that so? This will tell you whether this stock is worth buying or not, right?

Or basically, it will tell you what the expected return is over time, right?

Good. Listen, Google MacDougall. What? Revenue growth of 25%. This is amazing. As you know, for a company as established as Google, generating over one hundred billion dollars in quarterly revenue, achieving this level of growth is insane, isn't it?

Bravo to Google. I mean, what a monster by any measure. What a monster by all accounts.

Now, Google's business models are quite large-scale, aren't they? We know the Google search engine. We know Gemini. We know YouTube. We know Android. We know the cloud computing side of the business.

They also have many other businesses. It's unbelievable, isn't it?

The cost of revenue increased by 24%. This was less than the revenue. This is a good thing. Research and development expenses were slightly higher, at 36%. Sales and marketing 22%.

We accept that. Administrative and general expenses, they have already reduced them by 17% year-on-year. This is a great win. Total costs and expenses increased by 22%. So, if your revenue is up by 25%, which is always a much larger number than your costs and expenses, which have increased by 22%, then your income from operations is going to explode upwards.

This is what we saw here with Google McDougall: revenue from operations rose 30% year-over-year to $40.5 billion from $ 31.2 billion. I mean, this is really amazing right now .

There was something here that made Google's net income and earnings per share look worse than they actually should have been. That was if you considered that there were other expenses here amounting to $8.2 billion.

This item is constantly changing everywhere, isn't it? If you look at the same quarter last year, they made gains of $12.7 billion. Much of this is due to the volatility of their short-term tradable securities prices, where they are forced to record losses or profits that are not actually profits, but they are accountable for this according to generally accepted accounting principles.

Essentially, this is an exceptional scenario that makes the company's profitability appear lower than it actually is . So, when you look at net income, it appears to have decreased by 24% year-over-year, and diluted earnings per share have decreased by 26%.

But again , this is mainly due to this exceptional reason. I still give them a "minus" rating. It is still a very good and excellent report. Apart from that exceptional scenario , as I said, one should not overreact to these incidental matters.

This is where things become extremely important. The work that everyone cares about more than anything else at Google is this: Google Cloud. Look at this. Revenue more than doubled year-over-year from $15.1 billion in the same quarter last year to $30.7 billion this quarter.

This is incredible growth for a company of this size. Their cloud activity seems to be booming right now, doesn't it? In addition, it is not just about an increase in revenue without profitability.

They don't lose huge sums of money. No, look at the operating income of Google Cloud activity. It has more than tripled year-on-year from about 3.6 billion to 11.1 billion. So, revenues are booming for this business, but profitability is booming much more , isn't it?

And the stocks of memory chip companies, that's amazing. Truly amazing. Now, there are a few key things that have happened here that I want to explain to you. This is extremely important .

Okay, look at this. Google Cloud achieved record growth, with revenues increasing by 103%. Driven by strong growth in the Google Cloud platform across enterprise AI infrastructure and enterprise AI solutions, as well as core Google Cloud services.

Sales of Tensor Processing Unit ( TPU) systems were also an important contributor to revenue growth. Well, tensor processing unit systems, this is very important. Our investments in artificial intelligence are driving the growth of overall search queries, including business queries.

In fact, our annual growth in searches is the highest it has been in the past five years. So, that's unbelievable too , isn't it?

We have, as you know, investments in artificial intelligence, and it remains debatable whether all this spending will ultimately lead to a much greater return than what they are spending.

Essentially, the return is still debated as to whether it will be much greater than what they spend. Let's assume they spend 200 billion this year. Will the return be 400 billion , 600 billion, or 800 billion in the coming years , or will it be only 100 billion?

Isn't that so? There are still questions about that, but the moral of the story is here. AI investments are certainly paying off in several different ways, aren't they ?

But here we arrive at a truly negative situation with Google. Good? The company had a net income, remember , of about 26.4 billion. Now , if that hit hadn't been worth 8.2 billion, the figure would have been around 34 or 35 billion, wouldn't it?

But ultimately, the net income was 26.4 billion, wasn't it? But look at the property, facilities, and equipment. We are looking at the cash flow statement at this moment, aren't we ?

Purchases of property and equipment amounted to 51.3 billion. That's almost double the company's net income. They only spent it on property and equipment, right? That's a really huge amount.

That's a huge amount indeed. And once again we return to the debate about whether Google will recoup all of this money . As you know, we shall see. We'll see. But, man, that's too much.

I just want to talk about these Tensor Processing Units (TPUs), because you may have heard of them, and it sounds like Google is selling these units. Why would someone choose something like that instead of Nvidia chips, right?

Because everyone is clearly spending a lot on Nvidia chips, right? Therefore, it is a cost-effective alternative. Nvidia's AI chips are rare and expensive, making the application-specific integrated circuits designed by Google a cheaper and easier way to scale the infrastructure.

In addition, direct availability. Google has expanded its operations beyond simply leasing Tethered Processing Units (TPUs) across its cloud; it now sells or licenses them directly to AI pioneers like Anthropic, which plans to deploy one million units, while also partnering with rival cloud providers like Oracle.

Therefore, these tensor processing units will certainly be a huge factor in the coming years.

Remember that there is a lot of money being spent on chips right now and over the next few years, and there is enough for everyone. There is enough money to spend on Nvidia, AMD and even Intel, and certainly companies like Google are in a position to make a lot of profit as well.

I would add Amazon and Broadcom to that. A lot of money is being spent on chips now and for the next few years. You need all of that. And one of the biggest beneficiaries of chips will end up being Google too, won't it? Therefore , this is something to keep in mind.

Now, we're looking at the charting feature on thousandx.com here, right? This is exactly what you want to see from revenue growth over time. But what I really wanted to focus on was this Google graph here.

Because this chart is based on the past twelve months. It really shows you what's going on with Google, does n't it? Free cash flow continues to decline. If you look at the quarterly data , the situation is really bad, isn't it?

It has become negative now. But the company's operating cash flow continues to accumulate. And here's where this strange discrepancy occurs with a stock like Google right now, where you say: Well, their operating cash flow is higher than ever.

It's on a continuous rise, isn't it? But ultimately, they spend all they have on property, factories, and equipment.

Now, here's the important point. You want to know if Google stock is a buy. You want to look at something. Of course, we can review all the growth rates. We achieved 25% revenue growth, our cloud computing activity doubled, and profitability more than tripled.

I mean, it's unbelievable, isn't it? But what price are you paying? At 1000x, we have the evaluation over time, right ? Google's average historical four-year price-to-earnings ratio is around 23, right?

Now, based on Google's after-hours stock movement and next year's earnings forecast , I would say the stock's forward price-to-earnings ratio is currently around 19, while historically it's around 23 , so I can say that this stock was significantly undervalued even before the earnings release. But now that