Shares in Google parent Alphabet point higher on bumper results

Should ASX investors own the US tech giants?

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

This morning internet services and search engine giant Alphabet Inc. impressed investors with a better-than-expected revenue and profit result for the quarter ending June 30, 2019, alongside news of a $25 billion share buy back. 

It's the strong growth rates that are impressive given Alphabet is no tiddler at a US$800 billion market value. Check out below how strongly it's still growing, despite cycling off very large numbers and comparables. All figures in USD.

  • Revenue up 22% on a constant currency basis to $38.94b
  • Adjusted operating profit (backing out a regulatory fine in Q2 FY18) up 13% to $9.18b
  • Adjusted earnings per share up 21% from $11.75 to $14.21
  • Paid clicks on Google properties up 28% on prior corresponding quarter 
  • Google 'other' (cloud & hardware business) revenues up from $4.43b to $6.18b 

One important point to note on this is that while Alphabet's revenue and profit growth might look impressive in percentage terms, it's even more impressive in nominal terms. As the dollar value of additional revenue (e.g. $6.287b from Q218 to Q219) or profit it's adding versus comparable quarters is actually still growing, which is another reason the stock looks a buy in my book. 

The impressive numbers are before you get into the extraordinary set of digital assets and other enterprises the company controls.

These include its search engine business Google, Gmail, Google Drive, Google Maps, Youtube, Verily, Waymo, Calico, Google Fibre, Android, and its cloud business among others.

Investing is not rocket science and in my view you'd be crackers not to want to own a slice of this business over the long term.

I also think its valuation looks good compared to almost every growth, tech or blue-chip share listed on the S&P/ ASX200 (ASX: XJO).

Notably the top performing business on the XJO over the past year is Magellan Financial Group Ltd (ASX: MFG), which is up around 160%. Much of its success is built on simply buying to hold blue-chip tech businesses like Alphabet and Facebook. 

The one fly in the ointment is the increasing regulatory pressure on the business thanks to its growing dominance of the consumer-facing internet.

In the US the Dept of Justice has just opened an investigation into tech giants, while Alphabet has already been slugged with billions of dollars of fines by the European Union's competition regulator. Just today the ACCC in Australia also handed in a report over concerns Google and Facebook were blocking competition. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors.

Tom Richardson owns shares of Magellan, Facebook and Alphabet. You can find Tom on Twitter @tommyr345

The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Alphabet (A shares) and Facebook. The Motley Fool Australia has recommended Alphabet (A shares) and Facebook. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Share Market News

The silhouettes of ten people holding hands with their arms raised against the sky, as the sun rises or sets in the background.
Share Gainers

Here are the top 10 ASX 200 shares today

The ASX managed to bank a small rise this Tuesday.

Read more »

Sport trainer talking to little girl who is climbing wooden ladder in gym.
Share Gainers

Why Vault Minerals, Droneshield, Westgold Resources shares are climbing higher today

These shares are gaining on Tuesday, but why?

Read more »

A hipster-looking man with bushy beard and multiple arm tattoos sits on the floor against a sofa reading a tablet with his hand on his chin as though he is deep in thought.
Share Market News

ASX 200 slides on unexpected RBA interest rate call

The ASX 200 is tumbling on the RBA’s latest interest rate announcement.

Read more »

A young woman smiles as she rides a zip line high above the trees.
Financial Shares

5 best ASX 200 financial shares of FY25 (CBA didn't make the cut!)

These stocks were well and truly 'in the black' for share price growth last financial year.

Read more »

A young woman holds an open book over her head with a round mouthed expression as if to say oops as she looks at her computer screen in a home office setting with a plant on the desk and shelves of books in the background.
Share Fallers

Why Beetaloo, Botanix, Cobram Estate, and Origin Energy shares are falling today

These shares are having a poor session on Tuesday. But why?

Read more »

Two parents and two children happily eat pizza in their kitchen.
Broker Notes

Morgans reveals 4 ASX All Ords shares to buy now — and 2 may surprise you

The top broker has revealed a buy rating on four ASX All Ords shares from different market sectors.

Read more »

Excited group of friends sitting on sofa watching sports on TV and celebrating.
Share Gainers

Why Amaero, Black Cat, Domino's, and Ramelius shares are racing higher today

These shares are having a good session on Tuesday. But why?

Read more »

Five happy miners standing next to each other representing ASX coal mining shares which some brokers say could pay big dividends this year
Broker Notes

Macquarie predicts 63% upside for this ASX 200 mining stock

Which ASX 200 stock is it?

Read more »