Alphabet is ‘in good shape,’ bar is ‘lower’ for Amazon earnings

00:00 Speaker A

I do want to ask you about a couple of companies that report still this week. That’s Amazon and Alphabet. Speaking of companies whose fortunes have diverged over the past year. You look at these stock prices. Alphabet’s up something like 70% and Amazon hasn’t done much of anything. Does that mean the bar is lower for Amazon or does it still have a lot to prove here to investors?

00:24 Gil

Yeah, the bar is lower. Um now good news for Amazon. The fourth quarter was good for the consumer. uh and they in their retail business, they’ve been able to adapt well to tariffs and and other challenges. So the retail business should do well, margins should be strong because of how much automation and how much they’ve invested in their logistics and in shipping to to reduce costs there. And then on the AWS side, they’re growing slower than Google Cloud and Azure, but they do have an opportunity to accelerate as they deploy more compute for Anthropic. So, uh, yes, they they’ve been the laggard, but there’s reason to think that if they do better, they’ll get more credit for the fact that AWS is still the biggest hyper scalar. It’s substantially bigger than Azure and even even bigger bigger lead over Google Cloud. So they still have the opportunity to grow in this market and Anthropic should be helping them right now as they deploy more compute capacity for them.

01:47 Speaker A

And Gil, what does Alphabet need to say to keep the party going?

01:55 Gil

Yeah, so Alphabet’s in good shape in the sense that Microsoft Azure’s success probably means that Google Cloud has accelerated as well. Meta’s success in selling ads probably means that Google advertising businesses around search, YouTube, etc, should accelerate. So they’re in good shape. Expectations are very high. The multiple in the high 20s is about 10 points higher than it was just three or four months ago. So, uh expectations are high for Google to win and dominate AI. That that may be a little ambitious, but this quarter should be good because their two most important businesses should either uh stay uh at nice levels of growth or maybe even accelerate.

02:44 Speaker A

Gil, great to see you as always. Thanks so much.

02:49 Gil

Thank you.