Ca$htag$: GOOGL Cloud Decelerates, "Tremendous" User Base Adds Strength

right here on Schwab Network. I'm Nicole Petallides alongside Tom white. And it's time for cash tags. And for that we bring in Megan Brantley, VP of research at like folio. Thanks so much for being here today, Megan. We're taking a look here at alphabet. And what's your sentiment data showing you about the demand for Google's cloud for Google. I think that the cloud data that we're bringing today is really the most interesting, because we just saw the company report at the end of July, and cloud revenue accelerated grew by about 82% year over year. And we like to look at this as a bunch. We like to look at Google versus its peers. And we're starting to see this acceleration maybe taper off a bit. And we have an interesting view because if you look at things on the 90 day moving average, so, you know, the quarter looking back from now, we have that up by about 2% year over year. And that's not necessarily a 1 to 1 ratio. This for us is more of an acceleration or deceleration metric. But when you look at this on a 30 day moving average, you can see that slips a little bit. So we're starting to see a little bit of this acceleration start to level out. So that could be interesting to watch for alphabet because we know that this Google Cloud growth acceleration has been pretty tremendous over the last three quarters. Really. And another key takeaway when you look at this for me is Microsoft Azure is really popped. I know we're talking alphabet today, but you can see that acceleration, that bright yellow bar on the 30 day moving average for us. And so our data shows AWS and Microsoft really starting to pick up steam a little bit. And some of that Google Cloud pay starting to level off just a bit. But again, we're talking about leveling off from a pace of 82% year over year growth. So still pretty strong, but an interesting a little bit of a yellow flag, I would say showing up in our data, at least from the consumer perspective. Yeah. Megan, I think that's going to be one of the keys moving forward because the growth rate on Google Cloud has continued to outpace its competitors, right? It's in third place. So maybe it's got more ground to make up at this point. But when you look at, you know, maybe the stock price versus what the data says because of their earnings were so good, right? Yeah. They might have, you know, kind of outkicked their coverage on this one, but it still seems like demand for their, their cloud products and advertising continue to do well right at this point. And if you look at the if you look at it comparable, maybe the advertising side of their business, that's still going really well, right? Yeah. Whenever you think about alphabet, I was looking at a stat that blew my mind. They've got 13 different products that have at least a billion users. That's a tremendous user base that ultimately it can advertise into, and that's still the lion's share of its revenue. And we see Google search last quarter was still up 17% year over year. And this was a segment that AI was supposed to kill. And it's certainly not. We also see a major driver in YouTube. We often talk about streaming advertising and kind of the insulation that YouTube has with its live sports. And we see that lever continuing to draw eyeballs and advertiser interest moving forward. And you can see here on this chart, that yellow line is overarching demand across all of Alphabet's segments in our world. And that's even with its massive scale up by 4% year over year. And we still see that tracking ahead of the stock. So whenever we look at alphabet long term, this is a company that we're certainly not betting against. And and we think that for now, search and search and advertising looks very, very healthy. I would say the only yellow flag in our data at the moment is that cloud, right. That's starting to slow. So I think that that could be something that investors may not want to see next quarter. If that growth rate doesn't keep accelerating at the pace that it has. But the other segments certainly are outperforming. And we still see that as a compelling growth and long term bullish opportunity, at least in our data. So much to offer. And that was an interesting stat. With over 1 billion users on at least 13 of its products and the slower growth versus Azure and Amazon Web Services. But what about some other things that are interesting? Unveiled the Gemini 3.7 flash model for coding and agents. Even though the demand is higher than the share price right now, something like this may factor in as well. Yes, I think that investors have been waiting for for Gemini, the update, and really an update to its frontier model as all of the different AI platforms kind of compete. Gemini has been one that has been lagging. So I think people have been waiting for this update. I don't think that this is the the high end frontier model that investors are waiting on and expecting. But certainly we're seeing Gemini growth be pretty tremendous. I think that this was a story of there were four it went from 400 million users to a billion users and about 15 months. So we're still seeing rapid adoption and still massive market share ahead that Google has to steal should it execute. So nice adoption from a Gemini front, but still plenty of improvement to be made. Megan, a question about that as far as their their AI model compared to OpenAI. Claude from anthropic, you know, what is this going to come down to? You know, maybe Gemini is going to be preferred from just the casual, you know, person at home on their laptop versus, you know, these foundational models that are more geared towards business and technology. Is that maybe their niche for Gemini? Because, I mean, you know, I'm still doing Google searches, but I'm looking at Gemini that pops up right below the search. And it's actually pretty good stuff. Yeah. I think that you're exactly right. And I think that that's what consumers are talking about too. When we look at these mentions, just the way that consumers are searching has changed and Google has managed to retain those users versus losing it to these other LLMs. And part of that is now when you search in the Google search bar, you can search the same way that you would ask AI a question. And Gemini will answer your question without you ever leaving, without you having to scroll down and click on a link and try to read through to see what you're trying to find, kind of aggregates the answer for you. So I think that that's a major reason for its adoption. And when we look at our data, whenever we look at forward looking that Gemini adoption, we have it up by triple digits. So more than doubled on a year over year basis. And so that rate is holding, but it still is a smaller piece of the pie just in terms of overall chatter when it comes to these higher end frontier models like you mentioned. And Tom, I agree with you. I use that as well and find that to be very helpful. A lot of people thought Google might be left behind when it came to search, but that summation by AI Gemini has been very helpful. Megan Brantley, thank you so much. VP of research at like