Alphabet showed strong cloud growth, but the spending debate rolls on
Tesla’s record deliveries fail to reach the bottom line
Matt Britzman, senior equity analyst, Hargreaves Lansdown:
“Alphabet gave both the bulls and bears something to latch on to, so this result probably won’t change many minds. Cloud growth accelerated to 82%, offering powerful evidence that AI demand remains strong and continues to build. But higher capital expenditure and expected margin pressure will give sceptics more ammunition to question the returns from this investment. Our view is that this was a strong quarter, with investment flowing into the right areas and Alphabet continuing to stand out as one of the strongest full-stack AI businesses.
Tesla’s record delivery number was a red herring, with incentives and lower-priced models helping volumes but leaving automotive margins well below expectations. Investment is now accelerating, and free cash flow has turned negative, a necessary trade-off given the valuation rests heavily on autonomy and robotics. That makes the slow Robotaxi rollout harder to ignore, and investors will want clearer evidence of real progress now that the cash burn is being felt. Tesla has a significant opportunity in real-world AI, but we remain cautious on the near-term outlook given the high valuation and technical hurdles ahead.”
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