1 00:00:00,160 --> 00:00:02,720 We all know Google. It's an investor's favorite. 2 00:00:02,800 --> 00:00:05,920 Many people love this company because of its low valuation, 3 00:00:06,120 --> 00:00:09,400 its high quality earnings. It puts up cash quarter after 4 00:00:09,400 --> 00:00:12,120 quarter. And despite its best efforts, 5 00:00:12,200 --> 00:00:15,440 Google always seems to be underrated, a company that 6 00:00:15,440 --> 00:00:18,280 professional analysts never seem to give full credit. 7 00:00:18,360 --> 00:00:20,840 In fact, in this case, the professional analysts are even 8 00:00:20,840 --> 00:00:23,760 comparing Google to eBay. If I was going to kind of put 9 00:00:23,760 --> 00:00:27,880 this on the most basic terms, Google is becoming eBay. 10 00:00:28,080 --> 00:00:31,680 Google is now on eBay, an anequate business a has been, 11 00:00:31,680 --> 00:00:33,920 according to the analysts in this episode. 12 00:00:33,920 --> 00:00:36,920 I think it's time to dive deeper into these claims. 13 00:00:37,000 --> 00:00:40,160 Is Google becoming eBay? Is it antiquated? 14 00:00:40,160 --> 00:00:43,400 Is the business on track to be disrupted by Chachi, BT and 15 00:00:43,400 --> 00:00:45,040 other LLM's? We're going to take a look at 16 00:00:45,040 --> 00:00:47,160 the data and what it's currently showing us. 17 00:00:47,160 --> 00:00:49,240 We're going to go over a comprehensive overview of 18 00:00:49,240 --> 00:00:51,000 Google's earnings. Now, of course, we have some 19 00:00:51,000 --> 00:00:53,160 other news we'll be getting to in this episode as well. 20 00:00:53,160 --> 00:00:56,600 For example, we're starting to see the impacts of the tariffs 21 00:00:56,600 --> 00:01:00,520 kick in with corporate giants shredding their outlook over 22 00:01:00,520 --> 00:01:02,880 tariff uncertainty. This is something that I warned 23 00:01:02,880 --> 00:01:05,880 about a while ago, that these companies would say that they 24 00:01:05,880 --> 00:01:08,800 can't predict the future because of how unpredictable the tariff 25 00:01:08,800 --> 00:01:10,840 policy is. And now we're starting to see 26 00:01:10,840 --> 00:01:12,480 that show up in the earnings reports. 27 00:01:12,480 --> 00:01:16,240 We also have news that consumer sentiment continues to sour week 28 00:01:16,240 --> 00:01:18,200 over week. And some of the latest data, 29 00:01:18,200 --> 00:01:21,280 especially with companies like Chipotle, show that consumers 30 00:01:21,280 --> 00:01:23,480 are pulling back. And then finally, just today, we 31 00:01:23,480 --> 00:01:26,360 had the announcement of a new electric truck on the market. 32 00:01:26,400 --> 00:01:28,120 This one apparently is America made. 33 00:01:28,400 --> 00:01:32,320 It cost $20,000. It's backed by Jeff Bezos and 34 00:01:32,320 --> 00:01:34,760 it's retro. There's no LCD display in this 35 00:01:34,760 --> 00:01:37,080 one, so we have a lot to get to. We're going to be going over all 36 00:01:37,080 --> 00:01:39,480 of it in this episode. Now, we first have to jump into 37 00:01:39,480 --> 00:01:42,000 the headline news, which is Google reported their earnings. 38 00:01:42,240 --> 00:01:44,720 This was one of the most anticipated earnings of the 39 00:01:44,720 --> 00:01:46,680 week. I would say one of the most 40 00:01:46,680 --> 00:01:49,080 owned retail stocks in the world. 41 00:01:49,080 --> 00:01:52,200 Google's also a company that I have in both my portfolios. 42 00:01:52,200 --> 00:01:54,240 I have it as one of the mid holdings here. 43 00:01:54,240 --> 00:01:58,840 It's at a $49,000 position, currently around flat $1400 in 44 00:01:58,840 --> 00:02:00,880 the red. This is this has been a rather 45 00:02:00,880 --> 00:02:03,720 disappointing position so far, but I'll mention that it's 46 00:02:03,720 --> 00:02:06,160 mostly in line with my newer positions. 47 00:02:06,320 --> 00:02:08,960 My most recent but smaller position is Equifax. 48 00:02:08,960 --> 00:02:10,880 This one's currently well in the green now. 49 00:02:10,880 --> 00:02:13,080 It blew away their earnings and it's on a good track. 50 00:02:13,080 --> 00:02:15,840 But if we look here at Google, this company's important to me 51 00:02:15,840 --> 00:02:18,720 and a lot of investors because I have a good amount of exposure 52 00:02:18,720 --> 00:02:20,680 to it. Google's in my passive income 53 00:02:20,680 --> 00:02:23,720 portfolio and it's one of the few positions in my story fund 54 00:02:23,720 --> 00:02:26,760 portfolio. Now Google has done OK in this 55 00:02:26,760 --> 00:02:29,240 portfolio. I bought it at around $90.00 per 56 00:02:29,240 --> 00:02:30,800 share. So we're stillwell in the green 57 00:02:30,800 --> 00:02:33,640 on this one. But this portfolio overall is 58 00:02:33,640 --> 00:02:36,200 being led by Netflix. Google stock performance 59 00:02:36,200 --> 00:02:38,920 continues to be mediocre and part of the reason why is 60 00:02:38,920 --> 00:02:42,160 because of multiple compression. Simply put, Google's growing 61 00:02:42,160 --> 00:02:45,240 their earnings per share faster than the share price is growing, 62 00:02:45,520 --> 00:02:48,960 meaning that the multiples of the company on APE ratio become 63 00:02:49,040 --> 00:02:52,280 more compressed over time. And now we sit here with Google 64 00:02:52,280 --> 00:02:57,200 at an 18 Ford PE that's less than the S&P 500, meaning that 65 00:02:57,200 --> 00:02:59,240 investors in Google have reason to be bearish. 66 00:02:59,640 --> 00:03:02,640 And that's because they've been told a narrative that ChatGPT 67 00:03:02,640 --> 00:03:06,360 and other LLMS present a dramatic risk to Google's 68 00:03:06,360 --> 00:03:09,720 business, that there is a paradigm shift causing people to 69 00:03:09,720 --> 00:03:12,400 move away from Google search, their biggest and most 70 00:03:12,400 --> 00:03:15,440 profitable form of business, to other forms of consuming 71 00:03:15,440 --> 00:03:18,120 information. Gene Munster, a long term Google 72 00:03:18,120 --> 00:03:21,560 bull, has recently turned more negative on the company and he 73 00:03:21,560 --> 00:03:25,080 shared this dramatic shift in sentiment on his most recent BBC 74 00:03:25,080 --> 00:03:26,680 appearance. Good, but not great. 75 00:03:26,680 --> 00:03:29,200 We didn't get any clarity on that critical question that 76 00:03:29,200 --> 00:03:31,920 we're all talking about what's going to happen with search. 77 00:03:31,920 --> 00:03:34,000 I just want to put some quick parameters on that. 78 00:03:34,440 --> 00:03:38,640 A year ago, GPT, 200 million weekly users, it's probably 79 00:03:38,680 --> 00:03:41,400 about 600 million weeklies today. 80 00:03:41,760 --> 00:03:43,800 I mean that is off the charts growth. 81 00:03:43,800 --> 00:03:47,680 At the same time, if we compare that to what Google said on the 82 00:03:47,680 --> 00:03:51,680 call related to monetization of AI overviews, it's basically 83 00:03:51,680 --> 00:03:53,960 unchanged over the past few months. 84 00:03:54,360 --> 00:03:56,800 And so the users are going up, they're rolling out to more 85 00:03:56,800 --> 00:03:59,600 countries. But in other words, we still 86 00:03:59,600 --> 00:04:03,160 haven't learned much about how this whole search question comes 87 00:04:03,160 --> 00:04:05,480 out. The first claim he makes is that 88 00:04:05,480 --> 00:04:10,160 ChatGPT is around 600 million monthly active users, which that 89 00:04:10,160 --> 00:04:12,480 number seems correct. The last number they shared 90 00:04:12,480 --> 00:04:15,720 publicly was 500 million users, and ChatGPT is growing rather 91 00:04:15,720 --> 00:04:18,399 quick, so it seems like 600 million is a really good 92 00:04:18,399 --> 00:04:20,480 estimate. But then he goes on to say that 93 00:04:20,480 --> 00:04:24,680 Google has shown no progress in the amount of users engaging 94 00:04:24,680 --> 00:04:27,320 with their AI tools, which is simply false. 95 00:04:27,360 --> 00:04:29,360 And I'm not sure how Gene Munster arrived at that 96 00:04:29,360 --> 00:04:32,400 conclusion, but he continues on sharing this overall bearish 97 00:04:32,400 --> 00:04:36,680 sentiment on Google. Besides the other competitors, 98 00:04:36,680 --> 00:04:40,680 GPT in particular Grok are getting a ton of traction, Grok 99 00:04:40,680 --> 00:04:43,320 top app and the iOS and Android store. 100 00:04:43,720 --> 00:04:46,640 And so I think Melissa, as I say, good but not great. 101 00:04:46,840 --> 00:04:50,560 It's going to be really tough for long term investors to get 102 00:04:50,560 --> 00:04:53,640 comfortable that this in fact, is going to move in a different 103 00:04:53,640 --> 00:04:55,280 direction over the next few years. 104 00:04:55,520 --> 00:04:57,960 They've been at it two years now and still aren't seeing 105 00:04:58,080 --> 00:05:00,640 meaningful uptake. And if I was going to kind of 106 00:05:00,640 --> 00:05:05,040 put this all in the most basic terms, Google is becoming eBay. 107 00:05:05,040 --> 00:05:07,240 Effectively, its energy is getting zapped out. 108 00:05:07,240 --> 00:05:10,080 Before eBay, it was Amazon kind of taking its energy out. 109 00:05:10,360 --> 00:05:13,720 Now it's GPT Anthropic and Grok doing the same. 110 00:05:13,840 --> 00:05:16,960 A few months ago, G Munster referred to Google as the oxygen 111 00:05:16,960 --> 00:05:19,000 of the Internet. Throughout all of your life, you 112 00:05:19,000 --> 00:05:21,960 interact with Google thousands and thousands of times. 113 00:05:22,480 --> 00:05:25,000 They're almost everywhere. Now, the comparisons of Google 114 00:05:25,000 --> 00:05:28,840 to eBay may seem outrageous on the surface, and saying that 115 00:05:28,840 --> 00:05:31,800 Google has made no progress seems patently false. 116 00:05:32,080 --> 00:05:35,000 But this is not just a narrative that Gene Munster alone shares. 117 00:05:35,280 --> 00:05:38,040 Many people share this same sentiment around Google. 118 00:05:38,240 --> 00:05:42,160 And figuring out how much of a problem LLMS and ChatGPT are to 119 00:05:42,160 --> 00:05:45,040 Google is a serious question for investors. 120 00:05:45,040 --> 00:05:47,720 As investors, we can measure the progress of Google by looking at 121 00:05:47,720 --> 00:05:50,040 what's going on with the Business Today, and there's a 122 00:05:50,040 --> 00:05:53,200 couple key metrics that help paint a clear pitch picture of 123 00:05:53,200 --> 00:05:55,480 how this company is doing. We can start off by looking at 124 00:05:55,480 --> 00:05:57,120 the revenue of the company. Overall. 125 00:05:57,360 --> 00:06:00,760 Google is an entire company with every segment of business grew 126 00:06:00,760 --> 00:06:04,680 around 12% year over year, which is an acceleration of its growth 127 00:06:04,680 --> 00:06:08,000 rate a year ago. So not only is the growth strong 128 00:06:08,000 --> 00:06:10,000 with Google, but it's actually accelerating. 129 00:06:10,000 --> 00:06:12,720 If we smooth this out and look at it on a trailing 12 month 130 00:06:12,720 --> 00:06:14,400 basis, this is what it looks like. 131 00:06:14,720 --> 00:06:18,400 You can see that Google for a while had relatively low growth, 132 00:06:18,400 --> 00:06:22,280 around 3% a year ago and now it's accelerated back up to 12 133 00:06:22,480 --> 00:06:24,480 percent. This is mostly due to a recovery 134 00:06:24,480 --> 00:06:26,560 in the ad market and cloud growth. 135 00:06:26,720 --> 00:06:29,440 When we look at Google, the Google search, YouTube ad 136 00:06:29,440 --> 00:06:32,560 subscription and Google Cloud businesses are all growing at a 137 00:06:32,560 --> 00:06:34,840 fast pace. Now beyond just the top line 138 00:06:34,840 --> 00:06:37,800 growth, there's a lot of things happening under the hood and we 139 00:06:37,800 --> 00:06:39,600 can see what's going on with this summary of the latest 140 00:06:39,600 --> 00:06:41,440 events. The financial performance of the 141 00:06:41,440 --> 00:06:45,240 company overall was strong. Net income increased by 46% to 142 00:06:45,240 --> 00:06:48,440 34.5 billion. Earnings per share increased by 143 00:06:48,440 --> 00:06:52,240 49% to $2.81. Now part of this earnings per 144 00:06:52,240 --> 00:06:56,080 share growth was due to a one time sale, so it was a little 145 00:06:56,080 --> 00:06:59,400 bit lower, but even accounting for that it well surpassed their 146 00:06:59,400 --> 00:07:02,640 earnings expectation. So Google is growing faster than 147 00:07:02,640 --> 00:07:06,160 investors expect. The operating margins rose again 148 00:07:06,360 --> 00:07:10,040 up 2.3 points. This shows that Google still in 149 00:07:10,040 --> 00:07:13,560 their Business Today has operational leverage as they 150 00:07:13,560 --> 00:07:15,920 grow with revenue. Each incremental dollar of 151 00:07:15,920 --> 00:07:18,480 increased revenue increases the margins. 152 00:07:18,640 --> 00:07:21,480 They say that they now have a more favorable revenue mix 153 00:07:21,480 --> 00:07:23,800 that's offsetting the higher depreciation costs. 154 00:07:24,120 --> 00:07:26,760 Free cash flow for the quarter was 19 billion cash and 155 00:07:26,760 --> 00:07:29,040 marketable securities ended at 95 billion. 156 00:07:29,040 --> 00:07:32,360 Google's a company that today earns around $70 billion in free 157 00:07:32,360 --> 00:07:35,200 cash flow per year and the company authorized another $70 158 00:07:35,200 --> 00:07:39,200 billion in share repurchases. Now overall, these metrics look 159 00:07:39,200 --> 00:07:41,920 really strong. They don't show any signs of 160 00:07:41,920 --> 00:07:45,600 weakness in the business or any core aspect of the business when 161 00:07:45,600 --> 00:07:49,200 we look more specifically, Google was asked over and over 162 00:07:49,200 --> 00:07:54,520 again pointed questions about ChatGPT, about the risk of LLMS. 163 00:07:54,840 --> 00:07:57,840 The analysts dug in. They wanted to know if there's 164 00:07:57,880 --> 00:08:01,160 any signs of weakness in the amount of searches, the amount 165 00:08:01,160 --> 00:08:04,520 of search volume, if people are leaving Google search to now 166 00:08:04,520 --> 00:08:07,320 search on ChatGPT. They didn't beat around the 167 00:08:07,320 --> 00:08:08,880 Bush. They didn't avoid these 168 00:08:08,880 --> 00:08:11,200 questions. Google addressed them head on. 169 00:08:11,280 --> 00:08:14,840 Search continued with robust double digit revenue usage 170 00:08:14,840 --> 00:08:18,160 growth globally with over 2 billion people using search 171 00:08:18,440 --> 00:08:21,160 daily AI overviews, which is this new feature that's 172 00:08:21,160 --> 00:08:25,200 basically Chachi PT built in above your search queries. 173 00:08:25,480 --> 00:08:27,840 So you have the nice AI overview and then you have the links 174 00:08:27,840 --> 00:08:30,880 below. That exceeded 1.5 billion 175 00:08:30,880 --> 00:08:34,480 monthly users and drove an expansion in the numbers and 176 00:08:34,480 --> 00:08:38,159 types of answerable queries. Positive user reception for the 177 00:08:38,159 --> 00:08:42,640 new feature like AI mode, which is basically ChatGPT built into 178 00:08:42,640 --> 00:08:45,960 Google search with a longer and more complex queries and 179 00:08:45,960 --> 00:08:48,800 positive early feedback. They have a successful roll out 180 00:08:48,800 --> 00:08:52,920 of AI powered experiences in search in 140 countries over 15 181 00:08:52,920 --> 00:08:54,960 languages. The commercial queries and 182 00:08:54,960 --> 00:08:58,360 monetization rate for AI overviews remain strong and 183 00:08:58,360 --> 00:09:01,840 consistent with previous search features, meaning that even when 184 00:09:01,840 --> 00:09:05,000 they add in the AI overviews, their queries are monetizing at 185 00:09:05,000 --> 00:09:06,400 the same rate. They're actually having 186 00:09:06,480 --> 00:09:09,360 increased engagement with these new forms of searches like 187 00:09:09,360 --> 00:09:13,280 multimodal search circled a search on Android with 250 188 00:09:13,280 --> 00:09:18,000 million devices, 40% plus usage this quarter and Google Lens, 189 00:09:18,000 --> 00:09:21,080 Corey's and visual shopping also up significantly. 190 00:09:21,160 --> 00:09:24,200 So across the board in regards to search, the data shows that 191 00:09:24,200 --> 00:09:27,480 at least right now they are seeing strong growth in search 192 00:09:27,640 --> 00:09:30,400 both in total revenue and Corey volume. 193 00:09:30,720 --> 00:09:33,360 People are searching more frequently and they're doing 194 00:09:33,360 --> 00:09:36,360 different types of searches, broadening the type of search 195 00:09:36,480 --> 00:09:39,160 they typically have done. When we look at specifically the 196 00:09:39,160 --> 00:09:43,400 AI progress in Gemini, Gemini 2.5 is Alphabets latest 197 00:09:43,400 --> 00:09:46,320 generative AI model. It rolled out with breakthroughs 198 00:09:46,320 --> 00:09:48,960 and reasoning, coding and math, achieving top tier industry 199 00:09:48,960 --> 00:09:51,440 recognition and early user adoption. 200 00:09:51,560 --> 00:09:54,000 Now Google's showing off here that they're a real competitor 201 00:09:54,000 --> 00:09:57,000 in building the best models. They've continually been at the 202 00:09:57,000 --> 00:09:59,160 latest and greatest models in AI. 203 00:09:59,600 --> 00:10:02,240 It's true that Chachi BT has a really nice app and they have 204 00:10:02,240 --> 00:10:04,760 great models themselves, but Google's a very strong 205 00:10:04,760 --> 00:10:07,560 competitor here. Gemini and it's AI stack. 206 00:10:07,560 --> 00:10:11,240 The infrastructure, models, products and platforms power all 207 00:10:11,240 --> 00:10:15,360 key products. 15 products with over half a billion users 208 00:10:15,680 --> 00:10:20,000 including Android, Pixel, Google Assistant now being upgraded to 209 00:10:20,000 --> 00:10:23,160 Gemini across devices. This is where we see a very 210 00:10:23,160 --> 00:10:27,520 different strategy between Gemini and Chachi BT So far, the 211 00:10:27,520 --> 00:10:31,240 comparison that people want to make continually is comparing 212 00:10:31,240 --> 00:10:34,600 the amount of users on the Gemini app to the amount of 213 00:10:34,600 --> 00:10:38,200 users on the Chachi PT app. But Google's taking an entirely 214 00:10:38,200 --> 00:10:40,880 different approach. They're simply integrating 215 00:10:40,880 --> 00:10:43,720 Gemini into every aspect of their company. 216 00:10:43,760 --> 00:10:46,160 It's integrated into search with AI overviews. 217 00:10:46,480 --> 00:10:48,280 It's integrated into Google Documents. 218 00:10:48,560 --> 00:10:51,520 It's integrated into YouTube. They have it in Android. 219 00:10:51,520 --> 00:10:54,240 It's now becoming like this Siri of the Pixel phones and the 220 00:10:54,240 --> 00:10:57,000 Samsung phones. It's now the Google Assistant 221 00:10:57,080 --> 00:10:59,880 and this is what makes the analyst job difficult of doing 222 00:10:59,880 --> 00:11:03,440 these comparisons of Gemini to Chachi BT They're simply being 223 00:11:03,440 --> 00:11:06,040 used and consumed in different form factors. 224 00:11:06,360 --> 00:11:10,440 AI agents, new multimodal models of Imagine three VO2 and open 225 00:11:10,440 --> 00:11:14,560 models of Gemma 3 are broadening use cases in areas like robotics 226 00:11:14,560 --> 00:11:16,360 and health. The Gemini app and Gemini 227 00:11:16,360 --> 00:11:18,800 powered consumer experiences show rising momentum with 228 00:11:18,800 --> 00:11:22,200 increased product adoption and improved user feedback. 229 00:11:22,200 --> 00:11:24,520 While there's analysts talking about them not making any 230 00:11:24,520 --> 00:11:27,400 progress here, Google, Google noted many times and showed many 231 00:11:27,400 --> 00:11:31,880 examples in the data of making substantial progress in AI and 232 00:11:31,880 --> 00:11:34,880 consumption of AI tools in all of their various products. 233 00:11:34,920 --> 00:11:37,920 Google Cloud revenue continues to be a strong portion of this 234 00:11:37,920 --> 00:11:42,480 company, growing 28% year over year now to $12.3 billion, 235 00:11:42,640 --> 00:11:45,200 driven by core product and especially AI and cloud 236 00:11:45,200 --> 00:11:47,640 solutions. Google Cloud operating income 237 00:11:47,640 --> 00:11:52,000 increased by $2.2 billion, margins up to 17.8%. 238 00:11:52,440 --> 00:11:55,280 They have continued customer demand outpacing capacity. 239 00:11:55,560 --> 00:11:58,800 This is a repeated theme that they can't build these servers 240 00:11:58,800 --> 00:12:00,800 fast enough. They're requiring heavy 241 00:12:00,800 --> 00:12:04,320 infrastructure investments projected at $75 billion of 242 00:12:04,320 --> 00:12:08,520 CapEx for 2025, up from 55 billion in 2024. 243 00:12:08,840 --> 00:12:11,720 Now Wall Street's estimates going into this quarter was for 244 00:12:11,720 --> 00:12:16,000 73 billion and they went just above that with their CapEx 245 00:12:16,000 --> 00:12:18,640 investments. This is a good sign for Google. 246 00:12:18,920 --> 00:12:22,080 It means that even in the face of uncertainty and tariffs and 247 00:12:22,280 --> 00:12:25,320 everything going on right now, they still have so much demand 248 00:12:25,320 --> 00:12:28,040 for cloud that they need to build these investments. 249 00:12:28,120 --> 00:12:31,760 As Google Cloud grows over twice as fast as the rest of their 250 00:12:31,760 --> 00:12:34,800 business, this will make up a bigger portion of the business. 251 00:12:35,160 --> 00:12:38,280 And this is a fast growing margin expanding portion of the 252 00:12:38,280 --> 00:12:40,480 business. It's a good thing for Google 253 00:12:40,480 --> 00:12:42,520 Cloud to become a bigger portion of Google. 254 00:12:42,560 --> 00:12:45,680 They noted on the call that they have AI infrastructure advances 255 00:12:45,680 --> 00:12:49,640 including TP, US GPUs, plus their partnership with NVIDIA. 256 00:12:49,640 --> 00:12:51,960 They're also enhancing the security of their cloud with 257 00:12:51,960 --> 00:12:53,640 Wiz. This company they're acquiring 258 00:12:53,840 --> 00:12:56,520 that will have deeper Gemini integration and it will have 259 00:12:56,520 --> 00:12:59,280 more secure multi cloud. The cloud portion of Google 260 00:12:59,280 --> 00:13:02,080 remains a fast growing high margin business. 261 00:13:02,080 --> 00:13:05,000 Then we get to YouTube. As an investor in Netflix and 262 00:13:05,000 --> 00:13:08,520 someone that studied Netflix in depth for a number of years, 263 00:13:08,520 --> 00:13:10,200 it's one of my largest investments. 264 00:13:10,760 --> 00:13:13,720 I will note that YouTube is considered the largest 265 00:13:13,720 --> 00:13:18,360 competitor to Netflix by far. In fact, in my assessment, it's 266 00:13:18,360 --> 00:13:20,720 the only real competitor to Netflix. 267 00:13:20,960 --> 00:13:23,480 YouTube is an incredibly powerful property that Google 268 00:13:23,480 --> 00:13:26,160 owns outright. YouTube ad revenues up 10% to 269 00:13:26,160 --> 00:13:28,600 8.9 billion. Subscription and key growth 270 00:13:28,600 --> 00:13:32,760 drivers, YouTube Premium and Music are at 125 million 271 00:13:32,760 --> 00:13:35,480 subscribers. The total subscribers between 272 00:13:35,480 --> 00:13:39,320 YouTube and Google One now has surpassed 270 million. 273 00:13:39,360 --> 00:13:42,720 They are the ongoing leader in streaming with the number one US 274 00:13:42,720 --> 00:13:46,800 streaming watch time with strong growth in TV, podcasting and 275 00:13:46,800 --> 00:13:48,760 shorts. And YouTube's ad subscription 276 00:13:48,760 --> 00:13:52,360 business benefited from AI usage and product innovation. 277 00:13:52,400 --> 00:13:55,040 In the call, they also noted a lot of progress with their 278 00:13:55,040 --> 00:13:56,880 advertising, their cost structure. 279 00:13:57,000 --> 00:13:59,400 The company continues to show operating leverage. 280 00:13:59,600 --> 00:14:02,360 And then we get to Waymo, which is now being addressed 281 00:14:02,360 --> 00:14:05,640 one-on-one in the calls. Sundar Pichai had his first 282 00:14:05,640 --> 00:14:09,040 question directly about Waymo. We know rapid progress now over 283 00:14:09,040 --> 00:14:13,680 250,000 paid passenger trips per week, five times growth year 284 00:14:13,680 --> 00:14:15,360 over year. And Waymo is currently in the 285 00:14:15,360 --> 00:14:18,640 process of expanding into multiple cities, into Silicon 286 00:14:18,640 --> 00:14:23,600 Valley, into Austin, Atlanta, Washington, DC, Miami, Japan and 287 00:14:23,600 --> 00:14:25,440 so on. One of the KPIs we added, the 288 00:14:25,440 --> 00:14:28,320 Qualtrum, clearly shows the rapid progress in the amount of 289 00:14:28,320 --> 00:14:31,800 rides that Waymo's doing. This shows the amount of weekly 290 00:14:31,800 --> 00:14:34,320 rides that they've reported every single quarter that 291 00:14:34,320 --> 00:14:37,000 they've reported it. For example, Waymo first started 292 00:14:37,000 --> 00:14:41,880 reporting 10,000 rides per week way back in Q2 of 2023. 293 00:14:42,240 --> 00:14:44,680 So a couple years ago, they started off with this report of 294 00:14:44,680 --> 00:14:47,560 10,000 and then they didn't give us any updates. 295 00:14:47,680 --> 00:14:51,640 It was just 10,000. And then in Q2 of 2024, they 296 00:14:51,640 --> 00:14:55,880 said that it's reached 50,000. In Q3, they said that it's 297 00:14:55,880 --> 00:15:00,840 reached 100,000, in Q4 they said that it's reached 200,000, and 298 00:15:00,840 --> 00:15:05,200 then in Q1 of 2025, they say that it's reached 250,000. 299 00:15:05,200 --> 00:15:08,640 This is what exponential growth looks like, going from a factor 300 00:15:08,640 --> 00:15:12,640 of 10 to 250,000 in only a year. They have partnerships with 301 00:15:12,640 --> 00:15:15,680 companies like Uber and fleet operators to deepen operational 302 00:15:15,680 --> 00:15:17,680 scale. They have ongoing development 303 00:15:17,680 --> 00:15:20,560 with capabilities like airport access and freeway driving. 304 00:15:20,880 --> 00:15:23,640 They're exploring a range of business models, including 305 00:15:23,640 --> 00:15:27,080 licensing, partnerships, fleet OPS, rather than a single 306 00:15:27,080 --> 00:15:29,160 direction. There's one case where Waymo's 307 00:15:29,160 --> 00:15:31,360 trying to figure out what they believe will be the best 308 00:15:31,360 --> 00:15:33,920 business model going forward, and they'll go with which one's 309 00:15:33,920 --> 00:15:36,200 best. Waymo's becoming a rapidly more 310 00:15:36,200 --> 00:15:39,200 valuable part of Google. As the amount of trips they do, 311 00:15:39,200 --> 00:15:41,880 the revenue grows and the capability grows. 312 00:15:41,880 --> 00:15:44,120 Now, that's a bit of an overview of what's actually going on with 313 00:15:44,120 --> 00:15:46,200 the company. And that brings us back to our 314 00:15:46,200 --> 00:15:49,480 question of if Google's really becoming an eBay. 315 00:15:49,640 --> 00:15:52,480 Ebay's not the only company that Google's being compared to. 316 00:15:52,520 --> 00:15:55,360 There's even worse comparisons currently being made on 317 00:15:55,360 --> 00:15:59,480 primetime TV. What you're saying there is 318 00:15:59,480 --> 00:16:01,240 hauntingly familiar to what Ben writes. 319 00:16:01,240 --> 00:16:04,200 He said about a month and 1/2 or two months ago and and he used a 320 00:16:04,200 --> 00:16:08,240 comparison of Google, the Eastman Kodak, which oh boy 321 00:16:08,240 --> 00:16:09,960 thought was. This is what they're saying on 322 00:16:09,960 --> 00:16:13,680 TV, and this will instill fear in the heart of any investor 323 00:16:13,720 --> 00:16:16,400 hearing that Google's becoming a Kodak or an eBay. 324 00:16:16,400 --> 00:16:19,800 When there's people proclaiming the death of a company on TV, 325 00:16:19,800 --> 00:16:23,280 talking about how it's the next Kodak or the next eBay, it 326 00:16:23,280 --> 00:16:25,200 brings up some familiar memories. 327 00:16:25,560 --> 00:16:27,800 I've been through this type of thing a time or two. 328 00:16:28,200 --> 00:16:31,360 We've had Netflix declared dead many times in the past. 329 00:16:31,680 --> 00:16:34,440 Everyone's boycotting it. It's a woke company. 330 00:16:34,440 --> 00:16:36,120 Nobody's going to sign up for this company. 331 00:16:36,480 --> 00:16:38,760 The password crackdown, Everyone's cancelling their 332 00:16:38,760 --> 00:16:41,840 passwords. Disney, HBO Max, Apple TV. 333 00:16:42,080 --> 00:16:45,600 Netflix has no competitive edge. They're getting beat out by all 334 00:16:45,600 --> 00:16:48,480 the many competitors. Narratives spread very quick 335 00:16:48,480 --> 00:16:51,120 about companies, but the facts are what matter. 336 00:16:51,280 --> 00:16:53,840 The reason that Netflix is higher today than it was three 337 00:16:53,840 --> 00:16:56,160 years ago is because the fundamentals, the actual 338 00:16:56,160 --> 00:16:59,200 numbers, eventually punched through the negative narratives 339 00:16:59,200 --> 00:17:01,120 on the company. And if we look at Google, we see 340 00:17:01,120 --> 00:17:03,920 a similar dichotomy between the narrative and the numbers. 341 00:17:03,920 --> 00:17:06,599 On this most recent quarter, there were no alarming metrics 342 00:17:06,599 --> 00:17:09,880 that were flagged during the earnings call, which is notable 343 00:17:09,880 --> 00:17:14,160 because the analysts pressed the topic on AI competition and had 344 00:17:14,160 --> 00:17:18,359 there been any sign of erosion, declining clicks, shrinking cost 345 00:17:18,359 --> 00:17:21,839 per click, lower advertising interest, it would have had to 346 00:17:21,839 --> 00:17:24,000 been discussed. Google said there are no signs 347 00:17:24,000 --> 00:17:25,920 of any of that. They didn't even hint at it. 348 00:17:26,160 --> 00:17:29,440 Instead, management maintained a confident tone that search 349 00:17:29,440 --> 00:17:31,520 fundamentals remain strong across the board. 350 00:17:31,560 --> 00:17:34,680 Right now, there are no red flags from the internal data. 351 00:17:34,800 --> 00:17:38,480 Despite the massive hype surrounding Chachi PT and LLMS, 352 00:17:38,760 --> 00:17:41,320 we don't see any of it reflected in the report. 353 00:17:41,680 --> 00:17:45,240 Another way of saying it is that had you not known about Chachi 354 00:17:45,240 --> 00:17:48,680 BT, if for some reason you didn't know of its existence, 355 00:17:48,680 --> 00:17:51,320 you would have no way of knowing that there's any type of outside 356 00:17:51,320 --> 00:17:54,000 competitive force. None of it is showing in any of 357 00:17:54,000 --> 00:17:56,360 the metrics. Advertisers are still preferring 358 00:17:56,360 --> 00:17:59,280 Google, the budgets on advertising still have a strong 359 00:17:59,280 --> 00:18:02,040 preference and intent, and they're having high conversion 360 00:18:02,040 --> 00:18:05,280 rates through search queries. So far, competitors like Chachi 361 00:18:05,280 --> 00:18:08,480 BT have created no compelling alternative for advertisers. 362 00:18:08,480 --> 00:18:11,920 Part of the issue for Chachi, BT and these other LLMS is Google 363 00:18:11,920 --> 00:18:14,640 simply everywhere. They're not just on desktop 364 00:18:14,640 --> 00:18:17,840 search, but they're across Android, Chrome, Google Maps, 365 00:18:18,000 --> 00:18:20,560 they're in Google Drive, they're in Gmail, they're on YouTube. 366 00:18:20,560 --> 00:18:23,400 They are still the lifeblood of the Internet and Google is 367 00:18:23,400 --> 00:18:26,600 wrapping their AI models into every facet of their business. 368 00:18:26,720 --> 00:18:30,040 Simply put, as of this most recent quarter, as of today, 369 00:18:30,240 --> 00:18:32,520 there is currently no quantitative or qualitative 370 00:18:32,520 --> 00:18:35,760 evidence that Google score search business is being eroded. 371 00:18:36,120 --> 00:18:38,680 There is none. Revenue is up, engagement is 372 00:18:38,680 --> 00:18:40,640 high, advertiser demand remains strong. 373 00:18:40,640 --> 00:18:43,880 Google is incorporating AI defensively and offensively. 374 00:18:44,000 --> 00:18:47,280 Does Chachi BT present a risk down the road? 375 00:18:47,560 --> 00:18:51,040 Certainly, as does any new competitor to any company. 376 00:18:51,160 --> 00:18:53,680 But we don't see any of that weighing on Google today. 377 00:18:53,680 --> 00:18:57,040 Even noting the long term uncertainty that remains with a 378 00:18:57,040 --> 00:19:00,800 new competitive dynamic, I still continue to believe that Google 379 00:19:00,800 --> 00:19:02,200 is undervalued. Today. 380 00:19:02,520 --> 00:19:06,280 The stock is worth more than $200 considering the competitive 381 00:19:06,280 --> 00:19:08,840 dynamics and the strength that Google has shown in the face of 382 00:19:08,840 --> 00:19:12,480 it and the different properties this company owns from Waymo to 383 00:19:12,480 --> 00:19:15,760 YouTube to cloud. This company has many tools to 384 00:19:15,760 --> 00:19:19,000 grow its earnings, many tools to return a lot of cash flow to 385 00:19:19,000 --> 00:19:21,720 shareholders, and I believe this one will eventually get back up 386 00:19:21,720 --> 00:19:24,680 above $200 per share. This earnings report should have 387 00:19:24,680 --> 00:19:27,800 made investors incrementally more bullish and have a sigh of 388 00:19:27,800 --> 00:19:30,280 relief with many of the narratives being shared. 389 00:19:30,280 --> 00:19:34,560 Now moving on, we get to news that the haphazard off and on 390 00:19:34,560 --> 00:19:37,800 again way that the tariffs are being implemented is having an 391 00:19:37,800 --> 00:19:40,480 impact on both consumers and businesses. 392 00:19:40,800 --> 00:19:43,880 Corporate giants shred outlook over tariff uncertainty The 393 00:19:43,880 --> 00:19:46,680 CEO's of American Airlines, PepsiCo, Procter and Gamble and 394 00:19:46,680 --> 00:19:50,000 many other major U.S. companies warned that shape shifting 395 00:19:50,000 --> 00:19:53,160 tariff threats make it virtually impossible to plan and are 396 00:19:53,160 --> 00:19:55,760 spooking consumers. The major airlines told 397 00:19:55,760 --> 00:19:59,160 investors that leisure travel has already softened and pulled 398 00:19:59,160 --> 00:20:02,480 their full year outlooks because the economic climate makes it 399 00:20:02,480 --> 00:20:06,120 too difficult to forecast. Procter and Gamble, the maker of 400 00:20:06,120 --> 00:20:08,600 pampered diapers and Tide detergent, said it was 401 00:20:08,600 --> 00:20:11,560 considering raising. Prices on some items and the 402 00:20:11,560 --> 00:20:14,000 auto industry groups representing General Motors, 403 00:20:14,000 --> 00:20:18,040 Volkswagen, Toyota sent a letter to President Trump imploring him 404 00:20:18,160 --> 00:20:22,160 to reconsider the 25% tariff on car parts that goes into effect 405 00:20:22,200 --> 00:20:24,000 May 3rd. In summary, the phrase that 406 00:20:24,000 --> 00:20:26,360 they're repeating over and over again is we don't know what's 407 00:20:26,360 --> 00:20:29,520 going to happen, and this has big implications when major 408 00:20:29,520 --> 00:20:31,360 companies don't know what's going to happen. 409 00:20:31,560 --> 00:20:33,760 What does it mean? It means that we don't hire as 410 00:20:33,760 --> 00:20:35,760 much. It means that we don't bring on 411 00:20:35,760 --> 00:20:38,440 as many planes potentially. It means reduction in the 412 00:20:38,440 --> 00:20:41,600 overall economic activity. The same frustrating limbo looms 413 00:20:41,600 --> 00:20:43,520 over people trying to plan vacations. 414 00:20:43,520 --> 00:20:46,920 Now, as this is being reported, we also have other articles 415 00:20:46,920 --> 00:20:49,680 highlighting that in conjunction with the greater uncertainty, 416 00:20:49,880 --> 00:20:52,600 it's causing consumers to sour on the economy overall. 417 00:20:52,600 --> 00:20:55,360 The University of Michigan said Friday its final index of 418 00:20:55,360 --> 00:21:00,120 consumer sentiment for April was 52.2, down from from 57 in 419 00:21:00,120 --> 00:21:02,760 March, although the reading was an improvement over the very 420 00:21:02,760 --> 00:21:05,600 beginning of April. So it is going back up slightly. 421 00:21:05,960 --> 00:21:08,760 Quote, consumers perceived risks to multiple aspects of the 422 00:21:08,760 --> 00:21:11,960 economy, in large part due to ongoing uncertainty around trade 423 00:21:11,960 --> 00:21:15,280 policy and potential for resurgence of inflation looming 424 00:21:15,280 --> 00:21:17,080 ahead. Over the next couple of months, 425 00:21:17,080 --> 00:21:20,120 we're likely to see a lot more of this news as the impacts of 426 00:21:20,120 --> 00:21:21,960 the tariffs start to weigh on businesses. 427 00:21:22,080 --> 00:21:24,400 But there's also many opportunities for the economy to 428 00:21:24,400 --> 00:21:27,760 surprise higher. Any talk of tax cuts, any trade 429 00:21:27,760 --> 00:21:30,320 deals being mentioned with different countries, all of that 430 00:21:30,320 --> 00:21:33,480 could push the market's investor sentiment and consumer sentiment 431 00:21:33,520 --> 00:21:35,480 higher. So for now, the economy is a 432 00:21:35,480 --> 00:21:37,200 waiting game. Now finally we get to some 433 00:21:37,200 --> 00:21:39,840 interesting news here that there's a new American made 434 00:21:39,840 --> 00:21:43,120 electric pickup truck being announced and reportedly it's 435 00:21:43,120 --> 00:21:46,680 going to be only $20,000 after the credit rebate. 436 00:21:46,800 --> 00:21:50,040 They released a product demo showing off this new concept for 437 00:21:50,040 --> 00:21:53,240 this stripped down truck. This is a slate. 438 00:21:53,880 --> 00:21:56,280 This slate seats 2 and can carry sheets of plywood. 439 00:21:56,560 --> 00:21:59,520 This slate seats 5 and can fit tons in the front. 440 00:22:00,160 --> 00:22:03,240 It's actually the same slate. This is narrated by me, Jeff. 441 00:22:03,600 --> 00:22:05,680 I work at Slate and just happen to have a great voice. 442 00:22:05,800 --> 00:22:08,080 He really does. That's Chris, our CEO. 443 00:22:08,160 --> 00:22:11,160 Chris thinks new cars are too expensive and too complicated. 444 00:22:11,440 --> 00:22:14,760 A slate cost in the mid 20s. One SEC, Chris. 445 00:22:14,920 --> 00:22:17,520 Actually under 20 after current incentives. 446 00:22:17,520 --> 00:22:19,520 Go ahead, Chris. We took out everything that was 447 00:22:19,520 --> 00:22:22,280 in a car. That means no fancy screen 448 00:22:22,480 --> 00:22:25,680 colored lighting, cooled seats, self driving, self parking, 449 00:22:25,880 --> 00:22:28,280 automatic cup holders. Yes, that's a thing. 450 00:22:28,760 --> 00:22:30,360 But you can add accessories like. 451 00:22:30,360 --> 00:22:34,600 Little screen, big screen, SUV kit, fastback kit, open air kit, 452 00:22:34,640 --> 00:22:37,600 one speaker, a bunch of speakers, big bumper, spare tire 453 00:22:37,600 --> 00:22:40,920 holder, slatelets, fun grills, even funner lights. 454 00:22:41,360 --> 00:22:44,800 Colors, any color really. Wrap it in any color and slate 455 00:22:44,800 --> 00:22:48,240 access points means you can add an accessory now, later, or even 456 00:22:48,240 --> 00:22:50,000 make one yourself. It's like a potato head. 457 00:22:50,880 --> 00:22:52,400 Wait, maybe there's a better analogy. 458 00:22:52,480 --> 00:22:54,960 Actually, there is. Slate is the chameleon of trucks 459 00:22:55,120 --> 00:22:57,920 and SUV's. Seriously, just add the SUV kit. 460 00:22:57,960 --> 00:23:01,000 There are three. A slate is not like other cars 461 00:23:01,240 --> 00:23:06,360 or trucks or SUV's, and slate is not like other car companies. 462 00:23:07,000 --> 00:23:09,680 Slate, We built it. You make it. 463 00:23:09,920 --> 00:23:13,600 OK, there you have it, the new demo for this new concept of a 464 00:23:13,600 --> 00:23:15,920 vehicle. Now I must admit, this is a 465 00:23:15,920 --> 00:23:18,600 really intriguing and well done demo. 466 00:23:18,600 --> 00:23:21,720 We've seen cars go in One Direction of becoming more and 467 00:23:21,720 --> 00:23:24,800 more complex, more digital screens, which notably people 468 00:23:24,800 --> 00:23:27,160 don't really love the digital screens in cars because you 469 00:23:27,160 --> 00:23:30,120 don't have that tactile fill when clicking buttons. 470 00:23:30,200 --> 00:23:33,360 The screens can play a role, especially in navigation, but 471 00:23:33,360 --> 00:23:35,520 people want to fill those buttons when they're using their 472 00:23:35,520 --> 00:23:37,120 car. But this concept takes it a 473 00:23:37,120 --> 00:23:39,360 whole step further. They're going really hard card 474 00:23:39,360 --> 00:23:43,200 on the customization aspect of the vehicle where almost every 475 00:23:43,200 --> 00:23:46,280 aspect of it can have little attachments, add-ons, different 476 00:23:46,280 --> 00:23:49,320 wrappings, different styles. Even though it's bare bones and 477 00:23:49,320 --> 00:23:51,680 cheap, you can make it your own and make it special. 478 00:23:52,080 --> 00:23:54,680 This is a brilliant strategy. Now, they probably won't like 479 00:23:54,680 --> 00:23:56,920 this comparison, but if I was going to compare this business 480 00:23:56,920 --> 00:23:59,760 model to one company, it would be Crocs. 481 00:23:59,920 --> 00:24:02,720 That's right, Crocs. Now, before you object, tear me 482 00:24:02,720 --> 00:24:05,880 out for a minute. Crocs is a very simple product. 483 00:24:05,880 --> 00:24:08,600 It's a shoe that's not really like any other shoe. 484 00:24:08,880 --> 00:24:11,240 Or it's a sandal, not like any other sandal. 485 00:24:11,560 --> 00:24:16,000 It's a simple mold of a product. No frills, no padding, no laces. 486 00:24:16,240 --> 00:24:18,160 The simplicity is part of the appeal. 487 00:24:18,360 --> 00:24:20,600 But Crocs are also highly customizable. 488 00:24:20,600 --> 00:24:22,800 You have sports mode and you have leisure mode. 489 00:24:22,800 --> 00:24:25,160 You can change it to whatever mood or style fits you best. 490 00:24:25,280 --> 00:24:28,800 And then beyond that, Crocs has endless and endless 491 00:24:28,920 --> 00:24:32,200 customizations with different paints or wraps that you can put 492 00:24:32,200 --> 00:24:34,680 on the Crocs to give it your own individual style. 493 00:24:34,680 --> 00:24:37,120 This is a huge part of the reason this company has been so 494 00:24:37,120 --> 00:24:39,080 successful. They took something that was 495 00:24:39,080 --> 00:24:42,560 simple on the base and then made it highly customizable. 496 00:24:42,600 --> 00:24:45,480 Beyond customizing it through custom designs, they also have 497 00:24:45,480 --> 00:24:47,960 these things called jibbets that you can add onto the Crocs 498 00:24:47,960 --> 00:24:49,440 itself. They're like customizable 499 00:24:49,440 --> 00:24:51,320 refrigerator magnets. Kids love them. 500 00:24:51,400 --> 00:24:54,680 Crocs owns this product that at its heart is extremely simple 501 00:24:54,680 --> 00:24:57,440 and bare bones, but it has endless complexities and 502 00:24:57,440 --> 00:24:59,520 customizations to make make it unique. 503 00:24:59,680 --> 00:25:02,720 I can see this product being extremely successful if they can 504 00:25:02,720 --> 00:25:05,120 really pull it off for the price point that they're saying. 505 00:25:05,200 --> 00:25:07,520 This would be such an attractive product to people that don't 506 00:25:07,520 --> 00:25:11,640 want to spend 50 or $60,000 on a car, but they also want to have 507 00:25:11,640 --> 00:25:15,160 something that fills their own. And there is demand for going 508 00:25:15,160 --> 00:25:17,560 retro. And this thing's so retro that 509 00:25:17,560 --> 00:25:19,960 it doesn't even have speakers or a screen. 510 00:25:20,040 --> 00:25:22,920 In fact, you have to manually roll up and down your windows. 511 00:25:22,920 --> 00:25:25,880 So competition in the EV industry continues to heat up 512 00:25:25,880 --> 00:25:28,160 and I'm very impressed with the new vehicles coming out. 513 00:25:28,240 --> 00:25:30,080 Now that's going to wrap up this episode. 514 00:25:30,160 --> 00:25:31,080 I'll see you in the next one.