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Investors reacted negatively to Google parent Alphabetâ€™s Q3 results due mainly to a slowdown in growth in its Cloud division. Its 22% year-on-year growth lagged that of industry heavyweight Azure, suggesting the latterâ€™s rapid integration of generative AI into its offerings was paying off.
But Cloud only brings in about 10% of Alphabetâ€™s revenue. And the companyâ€™s main driver of results, advertising online, continues to perform very well with revenue growth accelerating to 10.7% in the quarter.
Accelerating sales growth and continued cost control efforts are leading to further gains in profitability with operating margins rising to 27.8% during the three months to September 30.
Pleasingly, YouTube pulled out of its post-ATT changes rut with advertising sales rising 12.5%, suggesting managers have finally adapted to the new rules at Apple.
The slowdown in Cloud growth is a worry, CEO Sundar Pichai very much needs to accelerate the rollout of AI research into actual products, and threats from regulators bear keeping a very close eye on.
But we shouldnâ€™t lose sight of the dominant position Alphabet holds in online advertising, the huge cash flow it pumps out quarter after quarter, and current valuation of 24 times trailing earnings that we believe warrant taking a closer look at the group this month.
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When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Alphabet made the list?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Foolâ€™s board of directors. Ian Pierce owns shares of Apple and Alphabet. The Motley Fool UK has recommended Alphabet.Â
(The post is shared from syndication feed, it is not edited by Analyzing Market Team.)