Alphabet Earnings: Search and Cloud Drive Some Growth While We Await Recovery in YouTube and Network

We are maintaining our $154 fair value estimate for Alphabet following first-quarter results. We were impressed by Google Search advertising revenue growth; continuing strength in the cloud business, which is making headway toward profitability, likely next year; consolidated margin expansion for the first time in three quarters; and the latest authorized share buyback. However, YouTube Shorts continues to pressure overall YouTube advertising revenue. Economic uncertainty pushed network ad revenue lower. Plus, increasing competition on the artificial intelligence side, whether in the cloud or the advertising segment, is forcing the firm to keep investing in enhancing computing capabilities. Nevertheless, we believe Alphabet has the necessary technology and talent to successfully battle AI competitors, especially on the search side.