We came across a bullish thesis on Alphabet Inc. (GOOG) on Substack by Elliot. In this article, we will summarize the bulls’ thesis on GOOG. Alphabet Inc. (GOOG)’s share was trading at $162.42 as of April 28. GOOG’s trailing and forward P/E were 18.13 and 18.05 respectively according to Yahoo Finance.
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Alphabet (GOOG) delivered a strong Q1 performance, with revenue growing 14% year-over-year in constant currency, GAAP profits rising 20%, and margins coming in ahead of expectations. Almost every major segment reported healthy growth, and despite market fears about AI disrupting its core search business, there’s little evidence of structural erosion. Yet the stock barely moved. The muted reaction stems from Google’s cautionary tone on Q2, highlighting macroeconomic uncertainty and the impact of the end of the de minimis rule, which affects low-cost, cross-border direct-to-consumer (D2C) imports from Asia. On top of that, the company’s ambitious $75 billion CapEx plan for 2025 — mainly for AI data centers and compute — has raised concerns about future depreciation and pressure on GAAP margins. Nonetheless, stripping out these short-term issues reveals a company growing steadily at 10-12% annually with GAAP margins north of 33%, underpinned by a dominant and defensible search franchise. Trading at just a modest multiple of 2026 earnings, Alphabet looks cheap — especially if you believe it retains its core economics and can normalize CapEx growth over time.
Search remains the foundation of Google’s business, and Q1 results showed no material signs of disruption. Revenue grew 10% year-over-year, largely due to pricing rather than volume, suggesting monetization remains strong even as demand softens. Paid click growth was just 2%, but average CPC rose, and Google noted AI Overviews are now reaching 1.5 billion users per month with monetization roughly in line with traditional results. The company is also experimenting with “AI Mode” in search — handling multi-step, more complex queries — which could expand monetization surfaces. Visual and multimodal search is another emerging moat, with features like Circle to Search now on 250 million devices and seeing 40% sequential usage growth. Lens is also gaining traction. Meanwhile, the slow fade of Google’s Network business, which has now declined for 11 consecutive quarters, is quietly helping margins by reducing TAC-heavy, low-margin ad revenue. As a result, Services margins hit a record 42.3% this quarter. Altogether, the bear case that generative AI will cannibalize search remains speculative. If this disruption thesis doesn’t materialize in the near term, Alphabet’s valuation becomes increasingly difficult to justify at current levels.