Gene Munster picks Google stock over Microsoft after Q2 earnings

Alphabet Inc (NASDAQ: GOOGL) says it performed better-than-expected in its second financial quarter. Shares jumped roughly 8.0% in after-hours.

Pro reacts to Google’s earnings print

The multinational brought in $42.63 billion from its “search and other” segment. According to Gene Munster – Managing Partner of Deepwater Asset Management:

Google’s 20-year lead in search will inform better AI decisions. We don’t see it in the products today. They’ll deliver on that and it’ll be good for ad revenue. They’ll have persistent growth for the next 5 to 10 years.

Ad sales in the recently concluded quarter stood at $58.14 billion – well above last year’s number as well as the Street estimate.

Also on Tuesday, Google said Ruth Porat is stepping down as its Chief Financial Officer. She will remain with the company as its President and Chief Investment Officer, though.  

Google Q2 financial highlights

• Earned $18.4 billion versus the year-ago $16 billion
• Per-share earnings also climbed from $1.21 to $1.44
• Total revenue jumped 7.0% year-on-year to $74.6 billion
• Consensus was $1.34 a share on $72.85 billion revenue

Google saw traffic acquisition costs of $12.54 billion in its recently concluded quarter versus $12.37 billion expected. On CNBC’s “Fast Money”, Munster picked Google over Microsoft and said:

Not just because the valuation difference but I think there’s a light year gap between what Microsoft has talked about versus what they’ve delivered and what they will deliver.

Is Google stock worth buying?

Other notable figures in the earnings press release include $8.0 billion in revenue from Google Cloud. Analysts had called for $7.87 billion and the number last year had come in at $6.3 billion. Munster added:

AI is a new topic for Microsoft. Google’s been talking about it since 2017 as an AI first company. We know data in AI is advantageous. I think it’ll benefit their search revenue in the years to come.

In June, Google filed a complaint against Microsoft’s Azure (find out more). Lastly, YouTube ad sales also recovered to $7.7 billion in Q2 – up $240 million versus experts forecast.

Munster dubbed Google stock inexpensive as long as the Nasdaq-listed firm can deliver on expectations of 11% growth next year.

Typically, you don’t get a company that has a poll position in a massive market that trades at a subpar multiple. I think we’ll fast forward six, nine, twelve months and see this story move higher.

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