$GOOGL · Schwab Network · 2026-10-28

So, we have a big test for the big technology companies today, with Alphabet (Google) among the companies scheduled to announce their results. I've looked at some of your data, and it seems that YouTube is far ahead of the competition.

Yes, I mean, I think it's difficult with a company like this because it's so huge and does so much work, and you have to put what you're doing in the right context, because of course we're talking about live streaming, and YouTube is doing a good job of that.

I think a lot of people will focus on cloud computing, of course, because that's where the growth is. These are the most exciting things. However, this company still relies on research for more than 50% of its revenue.

When we look at it, we see that the search activity is stable. There are many predictions, including my own, that artificial intelligence will really take a market share away from turning to Google to search for things, simply because the answers from artificial intelligence are better. But this has not happened yet.

So, there is definitely some flexibility in the search, which is confirmed by our data on higher search volume and higher cost per click that we obtained from Google.

So, this situation is fairly stable, isn't it? This is a rather boring story, but we must overlook it because it is extremely important to their work. Then, when we look at what you talked about regarding YouTube, yes, when we look at streaming, we see a general decline in the industry as a whole in terms of search traffic, and what people are generally talking about on social media, with the exception of YouTube TV.

They are the only ones who are still standing in this field. I think they are growing by more than 4% while everyone else is declining slightly.

And of course, there's the seasonality factor here. This data compares performance on an annual basis. But, you know, there will be some fluctuations, but for a Google investor, I think it's good to know that YouTube is still holding up even though it represents about 10% of their revenue.

It's a small part, but they actually do a good job.

Now it is clear that everyone will focus on cloud computing. This is where the huge numbers come in. That's where the exciting growth opportunities lie. It currently represents only about 15% of their revenue, but it has large profit margins and is growing very rapidly.

In fact, their revenues have increased by 82% year-on-year, and are expected to grow even more. Their income has tripled, and this is of course extremely important.

They have large profit margins, and I believe a large part of those margins comes from the fact that they manufacture their own chips. So, when you look at their performance in terms of search volume and consumer demand index, we find that they have achieved a 1% year-on-year increase.

It's not an amazing percentage, but I think one of the interesting points here is that Amazon is declining, while Microsoft is performing very well and growing very rapidly.

There is certainly a lot of excitement about the Tensioner Processing Units (TPUs) they are developing. It doesn't just reduce their costs. This is essentially their version of Nvidia chips, which I believe they made first.

They are not only cutting costs to increase profit margins, but they have now started leasing them out. Anthropic has agreed to use approximately one million of its units. There are rumors that OpenAI will buy a lot of them.

This opens up a completely new stream of revenue, which has been the focus of discussion in the last few quarters regarding capital expenditures.

Do you know how much they spend? They are talking about spending $200 billion in 2026 and increasing that number in 2027. Many people are concerned about that, but if Google Cloud continues to grow at the current rate and maintains profit margins close to 35%, and starts selling and leasing these processing units (TPUs), then that will be a real validation of capital expenditures, which have been the "bogeyman" in a lot of these earnings reports, because investors want to see capital expenditures turn into income.

I think this will be a very clear story that it works.

The other great thing here with regard to these data processing units is that they turn what was a huge cost center into a source of revenue. and that's kind of what's happening with Google as well.

They use it internally, and now it has become a source of revenue.

Therefore, this path is very attractive to investors because it clearly makes sense for this company, Google. It made sense for AWS at Amazon, and therefore it makes sense for TPUs at Google, and it is now a clear and obvious winning product for all their customers.

Therefore, I believe the story of capital expenditures and capital spending pressures will continue to fade as investors begin to see returns. And then you look at a company whose price-to-earnings ratio is around the 20s, with revenue growth of 25%, while earnings per share are growing by only 5% because of all that spending, but it starts to turn into a more attractive company, especially if they can maintain their search engine dominance in the face of artificial intelligence.

I think that will be a problem in the future, but they are doing a good job of integrating Gemini into search operations, so there is a lot to talk about in this short segment.

Overall, we tend to be more neutral towards this earnings report, but in the long run we are very optimistic about Alphabet's Google. First, you know that this stock has dropped by $90, and I have experience trading large conglomerates like this, and they usually tend to concentrate on the worst-performing sector.

There's always something wrong when you own a large company, so I think part of the lack of growth or stagnant streaming growth has affected this company. She's overcome her legal troubles and the stock has risen, but it's now $90 below its recent high.

As for the rest of the company's business, I think it's a tortoise and hare story; they're not really impressive when it comes to Gemini. They don't release new versions every week, but this company does amazing things, and frankly, the demise of Google Search has been documented not for years but for decades, that someone would come along and dethrone Google Search, but it doesn't look like it's going to happen, Landon.

The growth they are looking forward to in the field of cloud computing is impressive and amazing, yet this stock is $90 below its all-time high. As I said, I'll go back to the same discussion we had with Tom and Diana about Microsoft.

It will be about capital expenditures, profitability, and profit margins. And that's what I think they will be evaluated on.

As I said, with this stock down $90, the appeal of this stock is very real, Landa. I agree with you. And you know what? I agree with what you are saying regarding what investors will be looking for.

I would add that if they can demonstrate very attractive growth and profit margins, the focus or scrutiny on capital expenditures will decrease considerably, as it will be a case of proof.

For example: "Hello, yes, you were worried, we spend a lot of money, but look what this money has done for us, hasn't it? We spend money, and now we are making money, and this will continue to happen.

So, you should want us to invest in capital expenditures."

Um, also, regarding search engine stuff, you know, I think I personally fell into the trap of getting so caught up in the latest AI technologies that I suppose everyone else does.

But, you know, even technically savvy people still turn to Google for answers just as much as they ever did.

And at Likefolio, we track virtually every Google search. Um, we know what companies and brands are being searched for. And all in all, that search volume isn't decreasing. So, it's not being siphoned off by OpenAI or Anthropic or any of the others. So, it's still there.

And I honestly think, yes, Gemini isn't in direct competition with companies like Anthropic and OpenAI, as they're constantly raising the bar above each other. But, it's embedded within Google.

So, you now get very good AI answers when you go into Google. So, I think they're doing a very good job of defending the movement That's the search.

This story of Google's demise is either going to take longer than everyone thought—like I said, people have been saying it for a long time—or it simply won't happen. So, I think search is probably safer than many people believe, even I personally did a few months ago, because of the way they've defended it.

And the cloud space is very attractive because everyone is spending a lot of money, and they have what everyone else needs in these units.

And I'll tell you, it's a very small number in terms of TPUs compared to Nvidia. But, as an Nvidia shareholder, I'm not thrilled that Google is chasing Nvidia here, are I?

So, I own shares in both companies, we'll see who wins, but I think for Nvidia shareholders, it's a little uncomfortable to see someone else enter the market.

But yes, I think their capital expenditures will be justified today by higher revenues, all the success of Google's cloud investments, and sustainable profit margins. And I think that will put investors at ease, and then they can start looking at the price-to-earnings ratio and say, "Well, search is stable.

Google Cloud is on the upswing. Capital expenditures are making sense. This could be a good investment." Oh, so I think in the long run, it's a winning deal.

Regarding this earnings report, our data is somewhat neutral towards it. But, yes, in general, I agree with you, Kevin.

In the last quarter, investors were not impressed with their capital expenditures. Therefore, it will be interesting to see if the tone has changed this time. What are your profit results, Landon?

It's just plus three at the moment. But, if you want a more exciting number, our long-term score is 87 out of 100. So, this is one of the few companies that we have in what we call an infinite holding basket, where you can buy this stock, put it in a locked box, never touch it, and we think it will be amazing 10, 20, or 30 years from now.

Oh, so we're very bullish on this stock in the long run, but on this particular earnings call, the result is only plus three. So, it is essentially neutral.