with the Artificial intelligence (AI) booming in full force, investors continue to try and find ways to get a piece of the action. Fortunately, you don't have to look far.
the alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL )One of the world's most dominant institutions is at the forefront of this revolution. After releasing its financial data for the first quarter of 2024 which was well received by the market, the stock continued its rise. They are now up 59% in the last 12 months alone.
This leading Internet company is now worth more than $2 trillion. Let's take a closer look at its recent financials, attractive qualities and stock valuation.
By looking at the latest results
Wall Street likes to focus on headline figures, such as revenue and earnings per share. Alphabet crushed expectations here. The top line came in at $80.5 billion, up 15% year over year. The bottom line rose 62% to a total of $1.89 per share. This is just the latest report that shows the company's ability to maintain its strong underlying performance.
All segments of the alphabet did well. Ad revenue grew 13%, driven by solid exposure in search and YouTube. This is a very encouraging trend to see, given that the advertising industry was struggling in 2022. The advertising market is at a much better level these days.
What makes Alphabet a fantastic AI stock, however, is its Google Cloud division. The segment already offers customers a laundry list of AI capabilities in areas such as generative AI, machine learning, image and video, data, and consulting. Google Cloud, which grew 28% in Q1 revenue. Operating income of $900 million, becoming a leading AI infrastructure provider.
Many favorable features
It's not surprising that for Alphabet to reach its current $2 trillion valuation, it had to have some very attractive features. One such factor that cannot be overlooked is the powerful long-term tailwinds that have worked in the company's favor.
Of course, the rise of smartphones and the Internet over the past decade or so has forced Alphabet to become the so-called gateway to the Internet. Greater Internet usage, along with a larger number of Internet users, increases the ability for businesses to monetize this activity through advertising. And the popularity of streaming video has made YouTube a global entertainment powerhouse.
Returning to the topic of AI, there is perhaps no business that is better positioned to take advantage of the way this technology is developing. For starters, Alphabet has $95 billion in net cash on the books and unparalleled financial resources for constant free cash flow generation to invest heavily in research, development and launch of AI tools. It helps that the company's operating margins have averaged an impressive 26.2% over the past five years.
But perhaps even more remarkable is that Alphabet has countless products and services that are used by millions and even billions of people. This provides businesses with an invaluable way to unleash AI capabilities that can be immediately used by consumers, helping to maximize revenue potential.
The assessment remains compelling.
Investors may be surprised to learn that the stock still looks cheap after its recent run-up. Trading shares on a Forward price-to-earnings ratio of only 22.2.
If you decide to pay that price, you'll get one of the world's dominant businesses, one that's incredibly profitable, capable of growth, at the forefront of AI, and that Owns some of the world's most popular services. Plus, it doesn't hurt that Alphabet just announced a $70 billion share repurchase program or that the business will now pay shareholders a $0.20 quarterly dividend.
Although it currently sits in the exclusive $2 trillion club, investors should still consider buying Alphabet stock today.
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Suzanne Frey, an Alphabet executive, is a member of The Motley Fool's board of directors. Neil Patel and his clients have no positions in any stocks. The Motley Fool has positions and recommends Alphabet. The Motley Fool has a Disclosure Policy.
This brilliant artificial intelligence (AI) stock is now in the $2 trillion club was originally published by The Motley Fool.