3 Reasons to Stay Bullish on Google Stock Following Q1 Earnings
A positive start for Q1 earnings season
This is a companion post to a video I uploaded to the Accrued Interest YouTube channel - “3 Reasons to Stay Bullish on Google Stock Following Q1 Earnings”. Per usual, I wanted to use the Substack to explain some points.
1) Despite fears, Google search is still growing +10% YoY
The number one reason why I'm so bullish on Google is that I believe that the death of Google search advertising has been greatly exaggerated. This is a debate that's not going to be resolved in just one quarter, and frankly, I think investors are going to need to see OpenAI disclose its financials and go public to truly judge their progress versus Google.
2) AI Overview – 1.5 Billion Monthly Users
I believe that Google is underestimated in its ability to adapt to the changing AI landscape. The CEO announced that their AI overviews product currently has about 1.5 billion monthly active users. I think this is key because many people like to cite how many people are using ChatGPTs app, but Google has the advantage of weaving in its AI capabilities into its apps and other services that billions of customers are already using daily.
It is very difficult to change an ingrained habit. Even as more people anecdotally share stories about how their friends “never use Google anymore”, billions still use Google-owned services every day, probably in more ways than they even realize.
I think the “Google is dead” alarmists are wrong. If AI is currently cannibalizing Google search in a meaningful way, it is not showing up in any of the company’s recent financial reports over the last 2 years.
Time and consistent execution are the only things that are going to silence the critics of Google’s AI efforts. But this is why the stock is cheap (more on this later), investors are in a “wait-and-see” approach.
3) Waymo does 250,000 weekly passenger trips
Next, I want to highlight that Google reminded everyone that Waymo is one of the “Other Bets” that is truly working out. The company announced that Waymo is doing approximately a quarter million weekly passenger trips. To put that in context, that is up about 5X from this time last year when Waymo was doing about 50,000. I expect to hear more good things about Waymo coming out when Uber reports their earnings next Wednesday, May 7th.
4) YouTube advertising revenue is almost larger than Disney’s
Another star of the quarter was more and more investors realizing that YouTube is currently on track to have more ad revenue than Disney for 2025. YouTube breaks their ad revenue in Google's financials, and that was up a respectable 10% year over year. Google does not break out YouTube subscriptions, but they are growing at a very strong rate, and they're a big driver for the total subscription growth that the company is seeing. As you might remember from other videos I've made, YouTube is currently a leader in television and it's pulling away from the pack.
It will be difficult to find a bigger “Bull” than myself when it comes to YouTube’s future.
5) Investors waiting for antitrust cases to end to tell the hit to Google earnings
Another overhang on Google stock that is not going to be solved with this quarterly report is that investors are waiting for the final results of all of Google's antitrust cases to wrap up. Google is probably going to have to divest its Chrome browser and make other changes, and we still do not know how that's going to play out for the company. My opinion is that Google has already made changes to their business model to recoup whatever earnings they would theoretically lose when they divest Chrome.
6) Google stock is cheap, but worth the wait
Google stock remains cheap. I don't expect the stock to take off until we get the conclusion of the antitrust cases like I just mentioned. Google is trading at about 17x 2025 GAAP EPS, about 16x 2026, and a little less than 14x 2027. All these multiples are relatively cheap compared to Meta as well as other advertising companies.
And I think historically, if you're a long-term value investor, you'd be wise to wait it out and buy Google here until the fears around AI subside and the antitrust cases wrap up.
Over the next year I can see a path north of $200 a share for Google based on conservative assumptions. When making forecasts, I like to look at earnings 1 to 2 years out, and then discount back to 1 year from today. For Google - consensus estimates put 2027 GAAP EPS at $11.60 per share. If you apply an “average” forward market multiple of 18x, then in theory Google could be worth $209 per share in 2026. ($11.60 2027 EPS multiplied by 18x multiple = $208.80 in 1 year).
But everyone is going to have to be patient. Investors are not going to give Google credit for 2026 and 2027 earnings estimates until everyone gets a better handle on how global advertising spend will be affected by tariffs.
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-Accrued Interest