Alphabet’s (NASDAQ:GOOGL) shares have surged 25.4% year-to-date, outperforming the Computer & Technology sector’s 19.4% growth. This success is largely driven by the robust performance of the Google Services segment, which includes search, YouTube, and Android.
Alphabet is actively working to enhance this segment. Recently, Google introduced a new Notifications feature for its Android app, Google Wallet. The app now includes six notification categories—Tips, Purchases, Passes, Transit, Updates & Alerts, and Promotional Campaigns—enabling users to receive transaction notifications directly from Google Wallet instead of Google Play services.
Additionally, Google Wallet has rolled out the “Automatically add linked passes” feature, which allows providers to automatically add event tickets, promotions, and offers to existing passes. This expansion of Wallet app offerings on Android positions Google to capitalize on the growing digital wallet market. According to The Business Research Company, this market is expected to reach $47.7 billion in 2024 and $97.54 billion by 2033, with a CAGR of 19.6% from 2024 to 2033.
These developments give Alphabet a competitive edge over industry peers like Microsoft and Apple. Microsoft has added a cryptocurrency wallet to its Edge Wallet, which provides real-time cryptocurrency updates and transaction logs. Apple, meanwhile, continues to enhance Apple Wallet, allowing Apple Pay orders to be attached to receipts as PDF or image files, facilitating payment tracking in the Wallet app and confirmation emails.
Strength in Google Services Segment Boosts Prospects
Alphabet is continuously improving its search and YouTube businesses, along with Android, to strengthen the Google Services segment. Recently, Google introduced “Minimized Custom Tabs” for Google Chrome, enhancing user experience and browser functionality, which is expected to boost its search engine.
Additionally, Alphabet redesigned the YouTube Cast menu to expand its user base. The updated Cast icon features a floating bottom sheet with rounded corners, allowing users to control volume, voice search, and access remote control options for televisions.
In a significant move to boost its YouTube business, Google partnered with Peloton Interactive. This partnership requires Peloton All-Access members to have a YouTube TV subscription to watch content while using their machines, likely expanding YouTube TV’s subscriber base.
These initiatives are anticipated to bolster the Google Services segment’s performance in the near future, positively impacting Alphabet’s overall financial performance. The Consensus Estimate for 2024 total revenues stands at $295.53 billion, indicating a year-over-year growth of 15.2%. The consensus mark for 2024 earnings is $7.60 per share, reflecting a 31.03% rise from the previous year, with a 0.4% upward revision in the past 30 days.
Conclusion
Alphabet’s strong performance in the Google Services segment, combined with its robust cloud division, growing mobile search momentum, and strengthening generative AI capabilities, make it an attractive stock for investors. Trading at a forward 12-month P/E of 21.74X, Alphabet is at a discount compared to the Internet Services industry’s 22.40X.
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