To The Moon

Google's Q3 financial report showed that advertising exceeded expectations, while cloud business fell short. Considering the large base of the advertising business, even a less than 2% impact on profit margins and cash flow is significant. $Alphabet(GOOG)$ $Alphabet(GOOGL)$

This indicates:

1. Google's advertising efficiency, from browsers to YouTube, is recognized, and the overflow from TikTok adds to its advantage. Despite pressure to tighten spending, advertisers need to invest in more core channels due to competition and performance pressure, which is positive for Google and negative for other non-mainstream advertising channels.

2. The slower growth of the cloud business than expected led to a punishment of nearly -5% from the market, mainly due to being overshadowed by $Microsoft(MSFT)$ accelerated growth. In addition to the base effect, there is a greater demand for cost reduction in Google Cloud's customer base, and the incremental demand for AI has not yet been reflected.

Investors cannot ignore a fact that Google's AI business may first be reflected in advertising rather than cloud business monetization (even incremental advertising monetization brought by competitor products), which Microsoft does not have. AI cooled down in Q3 overall, and Bard was originally inferior to ChatGPT, so the release of products such as Gemini may be the key to the volume of cloud business next (after all, it is already imminent).

Therefore, the 5% drop after-hours is not only disappointing for cloud business, but also a "sell the fact" move, after all, too much earnings expectations were priced in the previous few days. However, it also provides investors with a very good platform for adding positions (building positions), after all, it has not completely broken the trend.