Alphabet Rides on Strong Google Services Segment

Alphabet’s GOOGL shares have rallied 25.5% in the year-to-date period, outperforming the industry’s growth of 21.2%. The outperformance can be attributed to the strong performance of the Google Services segment, which is mainly driven by Search, YouTube, Android, Pixel and its first-party web apps.
A strong product portfolio and an expanding partner base are key growth drivers of the Google Services segment, which contributes to the majority of Alphabet’s total revenues.
In the first quarter of 2024, revenues from the Google Services business increased 13.6% year over year to $70.4 billion, accounting for 87.4% of total revenues.
Alphabet’s division, Google, is making concerted efforts to strengthen this segment further on the back of feature upgrades for its first-party web apps in order to increase their adoption among users.
In this regard, Google’s implementation of a Material 3 redesign for one of its first-party web apps, Google Photos, remains noteworthy. The redesign has placed Google Photos’ core gallery in an internal container with a white background, while navigation, search bar and navigation drawer are placed on a light blue background.
Earlier, Alphabet also introduced a Material 3 redesign for the Google Pay web application to offer features like viewing payment methods saved to users’ accounts and allowing users to see their recent transactions by tapping on a card.
Alphabet is also making feature additions to bolster its search, Android, YouTube and Pixel product portfolio.

Other Google Services Efforts to Note

Alphabet’s latest addition of a “Listen to this page” text-to-speech feature on Google Chrome testifies to the aforesaid fact.
This feature strives to improve the user experience and functionality of the Chrome browser, which, in turn, will likely boost the company’s search engine.
Alphabet boosted its Android offerings with the roll-out of a new Google Maps feature that shows entrances for buildings to some select users, addressing the issue of navigating to specific building portions on the map.
This feature addition is aimed at improving the user experience for Android users by ensuring accurate directions for businesses or locations.
Google also strengthened its Pixel portfolio with the launch of a “Lookup” reverse number shortcut feature on the Google Phone app for all Pixel devices. The shortcut feature, present in the Recents tab, will open Google Search with the number, including country code, placed in parentheses when users tap on it to expand an unsaved incoming call.
Expanding partner base has also been a catalyst to the Google Services segment’s performance.
Google partnered with Peloton Interactive PTON to strengthen its YouTube business. This partnership marks a significant step for Google to expand its YouTube TV subscriber base, as it requires Peloton All-Access members to have a YouTube TV subscription in order to watch content while on their machine.
These efforts are expected to accelerate daily user activity on Search, YouTube, Android, Pixel and first-party web apps in the Google Services segment, which, in turn, is expected to drive Alphabet’s overall financial performance in the near term.
The Zacks Consensus Estimate for 2024 total revenues stands at $291.26 billion, indicating year-over-year growth of 13.6%.
The consensus mark for 2024 earnings is pegged at $7.60 per share, indicating a 31.03% rise from the year-ago figure. The figure has been revised upward by 0.4% in the past 30 days.

Zacks Rank & Other Stocks to Consider

Currently, Alphabet sports a Zacks Rank #1 (Strong Buy).
Some other top-ranked stocks in the broader technology sector are Arista Networks ANET and Badger Meter BMI, each sporting a Zacks Rank #1 at present.
Arista Networks’ shares have gained 30.6% in the year-to-date period. The long-term earnings growth rate for ANET is 15.68%.
Badger Meter’s shares have gained 27% in the year-to-date period. The long-term earnings growth rate for BMI is currently projected at 15.57%.

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