Alphabet (GOOG, GOOGL) stock is down Wednesday morning after reporting second quarter earnings yesterday. While the Google parent company slightly beat estimates (adjusted earnings of $1.89 per share and revenue of $84.7 billion), YouTube ad revenue fell short of forecasts and cloud revenue outpaced expectations.
Alphabet CEO Sundar Pichai commented on the tech giant’s capital expenditures (CapEx) spending into AI in its earnings call : "…the risk of under-investing is dramatically greater than the risk of over-investing for us here."
RBC Capital Markets internet analyst Brad Erickson joins the Morning Brief to weigh in on Alphabet’s CapEx.
"Certainly they have the balance sheet and that cash flow to fund this. There is always going to be some concern. And this is just kind of more of a near-term thing," Erickson states, pondering: "Is the company sort of structural return on invested capital declining? Yeah, I think you can you can probably make that argument. But to his [Pichai’s] point, if this opportunity does turn out to be as big as many think over time, these investments will have proven correct."
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