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hey welcome back to gu TR so I'm Dylan and I'm Vinnie and we're gonna take a look at Google's most recent quarterly earnings I'm a Google shareholder you're Google shareholder we're g to talk about Michael burry's exit from Google and why that may mattered as far as timing wise and we're GNA get into this quarterly report in terms of what I would do now with my Google Shares we'll get to it right oh so you know this is the most recent file 13f filing for Michael bur and his s Asset Management um he disposed of all of his Google Shares all right and as of the end of March of this year now we should be getting another updated one from him the next couple weeks but that's the most recent one we had and at that time he held no Google he he sold before that whole run up to 180 so he missed all that bad time yeah exactly as of you know the most recent reported filings there all right so you know pretty bad month for Google which is one of the largest tech companies in the world right and it's it's you know been a absolute like stalwart of of technology for a while um down 10% in a month you know is it a 10% off sale or is it actually justly deserved and the company's headed towards crap all right but don't forget like when you see those numbers over like the you know last month it's still up 21% almost year to date which is ridiculous that's more than double what the sp500 historically Returns on a yearly average right yeah I think this is this is more a is this a healthy correction because it's gone up a bunch or a changing of the tides right yeah yeah you know my my Google class basis is like just under $100 a share so and I didn't I haven't owned Google that long a couple years it's just being patient and buying it when I had the great opportunity so that's the question is this another great opportunity to buy Google Shares all right so when we get to the report itself here um the Topline Revenue growth for the most recent quarter 14% And then 15% on a constant currency basis compare that to last year where it was 7even and n% so they've gone from upper single digits to Mid teams in terms of year-over-year growth which is commendable right that's awesome I love to see when a business can do that additionally it's not just them scraping the bottom of the barrel for any Revenue they can find they're getting high quality Revenue because looking at the operating margin it's increasing year-over-year 29 to 32% right and this is a$2 trillion dollar market gamp company this is not a that's important yeah exactly and then you get additionally when you see that market uh that um margin expansion the revenue growth and they're buying back shares don't forget they have like one of the largest share buyback you know approvals out there you know I think apple is the only one that is larger um you're they're chewing up shares a little bit so look at the kind of explosive growth you see in earrings per share last year $144 this year $189 you know and the net income itself was significantly higher too but there're you know when you get on a per share basis it becomes even more powerful because of that that buyback program we're going to talk more about the buyback program here in a second though so where did this growth come from all right this this is one of the the concerns with the report and why the Market Per Se wasn't exactly enthused about it uh it was the old kind of stalwart business line Google search that provided the majority of this growth right this 42.6 billion to 48.5 billion you know this is like the you know the classic ad business right um whereas when you when they break out YouTube yeah there was growth but it wasn't as much growth as they expected right that was kind of one of the things that the analysts didn't really love about this report right um one other thing I would highlight here is Google Cloud 8 billion of Revenue last year to 10.3 billion this year this is the first quarter over 10 billion revenue and when you're talking about a profit basis too this was the first time the Google Cloud cross a billion dollars per quarter in profit that's fantastic so nice yeah all right uh so this is back to you know the profit and operating efficiency of the company itself um Google uh Services that's like the main St War business there uh 29.6 billion so the majority of the profit still coming from search by far in a way um you know cloud is definitely growing and now you're looking at that $ 1.1 billion dollars in that quarterly profit which is solid you know especially when you're looking at the fact that this business segment is growing significantly faster than the you know old Mainline business right um and then you know other bets they talked about how they're going to be investing A5 billion dollars towards weo um you know weo is definitely making inroads and delivering on this this this virtual taxi business more than other companies that talk about it a lot more in their press releases Tesla um but they're still not a profitable part of business and probably won't be for quite a significant period of time and don't forget Google also started paying a a dividend recently so this is where the the payouts for the dividend by class has broken down I'm not the biggest dividend guys so this to me I'm like sure nice but not not gonna move the needle for you all right so other things have been reported here this is highlighting what I was talking about in terms of their operating efficiency look at the cost of revenues right so they went from in the quarter quarter we'll look at that first 74.6 billion in in Revenue to $84 billion in Revenue right 84.7 but the cost of the revenues only went from like just under 32 billion to 35.5 you know that is some fat margins right yes you love businesses with that that sort of power you know same thing on the whole year to date right this 144 to 165 so significant growth on the revenue side but the expenses don't move nearly as largely so 62.5 to 69.2 you know that's that's that's the power of uh having a wide Mo that that's very durable moat and people are obviously paying a premium for services that Google provides which is things I love to see as a business owner right um all right back to this portion about EPS the same same kind of highlight that we had before where you're seeing how much more dramatic the EPS growth can be uh as they're chewing up shares their share count kind of U destruction here isn't as aggressive as I would love to see um unfortunately you know it's just there's such a big company that even like a hundred billion dollar stock buyback doesn't really move the noodle in your two trillion dollar market cap right it's only like 5% so yeah yeah yeah exactly that's over a period of time compared to Alibaba who's much more efficient with that but I'm gonna show you a chart actually here there it is um this is the actual you know kind of share count from macot trends of Google shares outstanding so are making progress on their share buback they've been doing it for a few years now um and you know you are definitely seeing a net reduction in the number of shares outstanding when we go back to this is cash flow statement just to kind of highlight you know their share buyback and how powerful they are um so repurchase of shares $ 14.96 billion most recent quarter but they had 5.7 billion of stock based compensation so like roughly a third of the um kind of shares that they're buying back are being given out in that new quarter as Meed new share for employees I that's kind of a lot that's a large portion of the buyback it is it is it's definitely something you see a lot with these like tech companies like you know they would have to be issu or buying back you know $6 billion dollar and shares per quarter just to maintain like a consistent even number of shares outstanding um but that that is definitely something you see problematic with particularly with large American uh tech companies that they have to be doing these Buybacks in order to be you know chewing up shares never mind or you know just maintaining even share count all right free cash flow uh this is the thing that I like to track the most now you know is it the best metric for for Google right now no it's debatable um because what they are doing is they're going through an investment cycle where they're putting a lot of infrastructure in for their AI products right yeah so capex is significantly higher now than you know it would be in previous times uh I didn't go back and dig up what the r capex was but the CF on the call talked about $12 billion per quarter being kind of their Baseline going forward uh for a you know purchase of property plant to CL which is their investment in nases also said it was it's mostly servers and and data center space like that's what they're investing in there's it it is odd to have a$2 trillion doll company that could see tremendous growth because we we looked at this earlier it was Google and meta of The Magnificent Seven stocks that were actually relatively to the other five the cheapest value the PE was under I think this there was like 28 or something close whereas other stocks were in the 50s 7s with Tesla you know Nvidia Apple is very high yeah yeah absolutely so they did generate 13.5 billion do basically in free cash flow this quarter trillion 12 month free cash flow is 60.8 billion we're going to carry that number forward here in a minute all right uh some notes from the conference call listen to you uh last call current CFO they're having a regime change which is you know can be good for a company kind of shake it up a little a little bit and see what the next man's going to do in terms of capital allocation um I don't know you know it's too ear to say if that's going to be a positive or negative thing obviously the CFO that's been there has been there for a long time um I think she said nine or 11 years something like that um but it was something to keep an eye on and watch what their Capital allocation looks like on the future quarters um so you know they were positive on the the AI uptake amongst their 100 largest customers U that significant portion of them are using their AI products um that AI itself is driving their Cloud growth rather significantly um they it's their products and people are coming to use their products that are really kind of moving the needle in terms of you know I think was like 29% growth in their Cloud sector for this quarter and then they also talked about how they're using AI internally to make the engineers more efficient giving them better tools uh and that you did notice on the reports I don't remember if I included a slide of this or not but their head count was down year-over-year uh so you know you know they're $5.7 billion dollar in in stock based compensation in quarters going to fewer employees so that's that's good okay and that you know their operating margins uh uh some segments were approaching 40% and that that was maintainable is what the the question was and they said yeah that we think that is something we can we can actually you know maintain our current uh operating margins so it's a good thing not really facing a kind of price crunch there all right so this is the numbers where the rubber meets the road so to speak here this is the market cap as of today uh been interesting that go back and calculate it when the shares were like $190 a share but I didn't do that uh $100 billion in cash and cash equivalence uh$ 13.2 billion long-term debt gives me an Enterprise value of like 1.98 trillion uh that's 6 60.8 trillion 12 month free cash flow it's only a 3.1% free cash flow yield this is H pretty poultry compared to the Google we saw not that long ago when I was buying shares um this is last quarter was 4.1% so it was a higher just you know 1% higher just in the last quarter as seen the multiples for all these large Mega cap companies kind of expand significantly to come back down over the last week or two uh but they still have expanded from where they were even just a quarter ago and you know when I was buying Google was like over 5% or right around 5 percent from a free cash flow basis so you know they've become a little bit stretched in terms of valuation um since the most recent uh kind of runup here uh I am not interested in buying more Google at the current shares uh share price but I am still going to continue holding my my Google sh I don't see any reason based upon the report why I would even consider selling at this point in time we need to talk about the elephant in the room here because these are all numbers right but chat GPT announced a possible search engine a what search GPT I think they're which be a direct competitor to Google yeah so that could be a GameChanger you know Google did mention something about how uh more 18 to 24 year olds are actually using um their AI like Search tool than just traditional Google search as well so it might be like a generational rotation in you know search I mean I'm a millennial so I'm still someone that just Google things I don't use AI that often that's fair I do I do think chat GPT search could be a real issue going forward I don't know the actual impact it's way too early obviously doesn't exist yet um but that that is a little bit nerve wracking to be honest because chaty BT we've seen a lot of people use it for a lot of incredible different things having it's own search engine which would draw traffic away away that would severely hurt Google because you see where we get our ad Revenue it it's all Google search yeah I really hope that narrative takes off and Google stock plummets down to like $70 a share uh because then I I'll I'll not be shy about it like when I was with meta I'm gonna just buy a crap ton so really keep pushing that narrative that like AI search is going to destroy Google business I think it will I don't think we're going to hit 70 I don't think that's going to happen but all right guys say same about meta don't even get me started all right guys let us know what you think catch you the next one
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