Alphabet (GOOG) Fell in Q1 Despite Meeting Earnings Expectations

Soumya Eswaran

Wed, Apr 16, 2025, 6:53 AM 3 min read

Oakmark Funds, advised by Harris Associates, released its “Oakmark Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. The fund’s investor class returned 1.14% in the first quarter, compared to a -4.27% return for the S&P 500 Index. The fund has returned 12.76% since its inception compared to the index return of 10.44% over the same period. The largest contributors to the fund for the quarter were financials and consumer staples while consumer discretionary and communication services detracted. In addition, you can check the fund’s top 5 holdings to determine its best picks for 2025.

In its first quarter 2025 investor letter, Oakmark Fund emphasized stocks such as Alphabet Inc. (NASDAQ:GOOG). Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, offers various platforms and services operating through Google Services, Google Cloud, and Other Bets segments. The one-month return of Alphabet Inc. (NASDAQ:GOOG) was -4.57%, and its shares lost 0.85% of their value over the last 52 weeks. On April 15, 2025, Alphabet Inc. (NASDAQ:GOOG) stock closed at $158.68 per share with a market capitalization of $1.918 trillion.

Oakmark Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q1 2025 investor letter:

"Alphabet Inc. (NASDAQ:GOOG) was the top detractor during the quarter. The U.S.-headquartered company’s stock price declined despite having posted fourth-quarter 2024 earnings that were in line with consensus expectations. Search revenue growth remained strong, and management reiterated that the new “AI Overviews” feature is driving higher engagement with comparable monetization. The one miss during the quarter was in the Cloud segment, where revenue grew 30% year-over-year but fell slightly short of consensus expectations. We believe the shortfall was largely due to short-term capacity constraints and that the long-term growth outlook for Google Cloud remains robust. We continue to see Alphabet as a collection of great businesses that can further benefit from the company’s world class AI capabilities. With shares trading at just 15x our estimate of next year’s earnings per share, we believe the stock is meaningfully undervalued."

A laptop and phone open to Google's services in an everyday setting.

Alphabet Inc. (NASDAQ:GOOG) is in 7th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 174 hedge fund portfolios held Alphabet Inc. (NASDAQ:GOOG) at the end of the fourth quarter which was 160 in the previous quarter. In 2024, Alphabet Inc. (NASDAQ: GOOG) achieved a revenue growth of 14% compared to 2023, reaching $350 billion. For the fourth quarter, the revenue was $96.5 billion, reflecting a 12% increase in both reported and constant currency. While we acknowledge the potential of Alphabet Inc. (NASDAQ:GOOG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.