Alphabet reports strong Q1 results with revenue increase and heavy investment in data infrastructure.
From Nasdaq: 2025-05-01 11:55:00
Alphabet reported strong Q1 results, with a $10 billion increase in revenue to $90 billion, a 12% increase YoY, and net income growing 46% to $35 billion. The advertising business grew 8.5% to $67 billion. The company is investing heavily in data infrastructure, with a $75 billion budget for CapEx this year.
Alphabet is facing an antitrust case from the DOJ, potentially leading to a breakup. If Alphabet were to split up, the cloud segment, which saw a 28% increase in revenue and an operating margin of 17.8%, could be an attractive investment opportunity. Other parts of the company may also present interesting opportunities post-breakup. Alphabet’s cloud division, Gemini, shows progress with 1.5 billion AI users/month. YouTube up 10%, subscription revenue up 19%. Chrome could be split off. OpenAI interested in acquiring Chrome for AI browser. Tesla’s Q1 earnings down with net income dropping 71%. Regulatory credits saved from loss quarter. Brand tarnish affecting deliveries. Tesla’s autonomous future at risk. Model Y deliveries may lift Tesla. Chipotle looks to boost business in burrito season. Chipotle reported a 6% increase in sales to $2.9 billion, but saw a 0.4% decrease in comps. Margins were down, with adjusted EPS up 7%. The company is focusing on opening new restaurants and improving throughput to offset costs and inflation. Chipotle also announced a partnership to open restaurants in Mexico. ServiceNow saw a 15% increase in shares following strong earnings, with current remaining performance obligations growing at 22%. The company’s success in the public sector, particularly with US federal contracts, contributed to its strong performance. ServiceNow is also making strides in AI technology, partnering with Nvidia to integrate agentic AI into its platform. Intuitive Surgical, a Fool favorite, reported strong earnings results.
Malcolm Ethridge notes that Big Tech, which led market returns in 2023 and 2024, is now underperforming in 2025. Despite this, he believes there is still room for growth within the tech ecosystem, especially in sectors like Cloud computing.
Specifically, companies like Microsoft and Amazon, which have seen a 20% dip from their highs, present buying opportunities for investors due to their continued investments and growth potential.
Intuitive Surgical, a long-time outperformer, reported a strong first quarter with revenue of $2.25 billion, up 19%. Non-GAAP earnings per share were $1.81, up over 20% from the previous year. The company saw growth in DaVinci procedures and placed 367 DaVinci systems in the quarter, bringing their total to over 10,000 systems worldwide.
– Malcolm Ethridge discusses the importance of companies reassessing their AI investments. Companies like Microsoft, Google, and Amazon have made significant investments in AI, leading to a need for consulting firms like Accenture and IBM to help other businesses apply AI to their specific needs.
– Accenture has highlighted the AI consulting business as an exciting area with a lot of billable hours. The upfront cost for clients is often helping them understand what AI means for their business, followed by implementation, making it a lucrative field for consultants.
– Malcolm Ethridge expresses concerns about investing in Big Tech companies like Google and Meta due to potential risks. Google may need to cannibalize its search business to move forward, while Meta faces antitrust scrutiny that could impact shareholder value.
– Google and Meta face challenges with competitors like TikTok and potential antitrust actions. Google’s search revenue may be threatened by the need to adapt, while Meta’s structure with Facebook, Instagram, and WhatsApp could be impacted by potential breakup. The big question for a company is whether they can adapt to changing consumer behavior and integrate ads effectively. There may be more pain for shareholders until they find a solution, possibly requiring a new CEO focused on product development. Cybersecurity and services like Netflix and Spotify are seen as recession-resistant investments due to increased demand in uncertain times. Companies like Netflix and Spotify have built strong user loyalty, making them defensive plays in the market. The key to success lies in understanding how consumer spending habits will shift in a changing economic landscape. Adobe has partnered with the NFL, providing applications for generating fan content. The NFL and all 32 teams will use Adobe’s software. Meanwhile, Asit Sharma is eyeing NASDAQ, symbol NDAQ, for its growth and diversity under CEO Adena Friedman. NASDAQ operates the exchange and has become more than just a trading volume reliant company. In a recent Money radio show, experts discuss the potential for Adobe to expand through partnerships and entering new markets. With mixed feelings towards Adobe’s products, the experts weigh in on whether to add the company to their watchlists for the week.
The show featured experts with positions in various companies like Adobe, Amazon, and Spotify. The Motley Fool’s board includes executives from Alphabet and former directors from Facebook. As the show wraps up, the experts thank each other for sharing their insights and look forward to the next episode.
Read more at Nasdaq: Tesla’s Rough Quarter, Alphabet’s Resilience, Chipotle’s Burrito Slowdown, and More