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Around the Desk: This is where we at Avory think out loud, challenge narratives, and look for signal through the noise. Each episode, the Avory & Co. team dives into what’s moving markets, how companies are performing, and where opportunities may be forming. We break down earnings, macro trends, and investor sentiment — all from the lens of a concentrated, high-conviction portfolio.
*** The views expressed on Avory Podcast: Around the Desk are those of the hosts and guests and do not constitute investment advice. This podcast is for informational purposes only and should not be relied upon to make investment decisions. All investments involve risk, including potential loss of capital. Avory & Co. may hold positions in the companies discussed.
All right.
Welcome back to Avery's around the
Desk podcast where we dig into markets,
companies, and different things
shaping where the world is headed.
You know, today is a postmortem
where we cover quickly post earnings.
Uh, some of the most critical companies
in the markets earning season is here.
We're right in the thick of it.
You know, some of our companies have
reported here over the last couple
days, everything from Omnicell,
which had a very strong report to Mr.
Car Wash.
A new investment of ours also
had a very strong report.
The market tended to like those reports.
We just covered meta in our past podcast,
so go look at that or go listen to that.
Uh, these will be brief,
but today is alphabet.
It's Google.
I will talk about that here.
You know, their Q3 2025 results.
I think the key framework here is
this quarter was strong across the
board growth, accelerated engagement
improved, and AI continues to show up
as a tailwind and less so as a threat.
You know, revenue to set this up was
up 15% in constant currency terms.
Accelerating from 13% last quarter.
Really a clear sign that Google's
core business is holding up Just
fine to put some context around that.
And just to show you some of the.
Um, you know, difference in terms
of, uh, you know, growth rates.
Meta just reported 26% growth.
Nearly two x that of Google, yet
people question the CapEx spend.
I think that's the wrong thing to do.
I also think that's the wrong
thing to do potentially for Google.
I think these companies are
primed to win in the AI era.
And that is showing up for both of them.
So go get, listen to that.
You know, search for Google grew 15%.
YouTube ads were up 15%.
Cloud grew 34%.
Probably the biggest number of the
entire earnings report for Google was
this a backlog up 46% sequentially.
That was it.
You know, I think that is ultimately the,
the line item that people are connecting
CapEx to future demand and ultimately ROI.
Paid clicks for Google Up
seven versus four last quarter.
Cost per clicks climbed 7% queries
and commercial intent searches
were both higher, so people
aren't leaving Google, you know?
I think they're just searching more.
It's part of our thesis.
With some of these, you know, chat
GBT or search like tools, which is,
I find myself querying and searching
more, getting deeper, richer, um,
you know, answers, which leads to
more queries, to more questioning.
You know, I think anyone that is, you
know, in the world of trying to learn,
uh, or trying to, you know, ensure
you're synthesizing information as
best as possible, finds themselves
probably querying more, not less.
Maybe still using Google
for certain things.
Uh, and we'll talk about
that here in a second, but.
You know where the story gets interesting,
I think is, despite these numbers, there's
still this lingering question is, you
know, what happens when the way we search
for information fundamentally changes?
You know, I said this on
Bloomberg earlier, uh, today,
and it was really about meta,
and I think it applies here too.
Markets love anchoring to old stories.
You know, for Google, that
story is AI will eat search.
And I think it's fair to say
that if you look around, you look
at companies like perplexity.
They launched their own browser in Comet.
It's pretty cool chat.
GT has Atlas.
They just announced that you look
at someone like Atlassian in the
enterprise, they bought a the, the browser
company and they have the product dia.
And I think all of these players,
everybody in theory is trying
to become an AI first interface.
For information retrieval
makes a lot of sense.
Uh, it's probably the best use
case of many of these things.
So yes, look, if you're looking
out five to 10 years, I think it's
reasonable to assume the way we
search will transform completely.
I think the question though is
does Google lose that future?
Or do they adapt to it?
And I think when we look at the Google's
strategy, their AI strategy this quarter
simply says that they're adapting
and doing so pretty aggressively.
You know, we know a AI
overviews, AI mode, Gemini app.
They're embedding generative models
across search chrome and workspace.
They obviously sell compute.
They have their own TPUs, which competes
against, you know, other chip makers.
And all of this seems to be
working, at least for now.
The Gemini app has 650
million monthly active users.
That was a disclosure they gave this
quarter with 300 million of those paid,
and that's adding roughly 250 million
users in a pretty quick timeframe.
Queries through Gemini are up
three x quarter over quarter.
So you're seeing massive adoption
and I think the proof that Google.
Is here, they can distribute AI at
scale faster than pretty much anyone.
I think meta, again, is that camp.
I, I eventually think, you know,
uh, AWS and, you know, scale
matters in the AI world, and I
think Google is, is showing up.
Um, I think there's something about that
300 million paid subs and 650 million.
You can still question that a little
bit just given the fact that, you know,
are, these are likely not net new users.
You know, chat, GBT,
everything is net new.
Versus, you know, someone like,
and even perplexity and some
of the other tools out there.
So Google has an advantage, and
the question is, you know, do
those numbers signal that they're
capturing enough attention there?
I would say so.
I think they're, they're still
strategically in a pretty good spot.
Um.
The interesting contrast, you know,
when I look at it here, is that
meta spending drew some pushback.
You know, their CapEx hit 70 to 72
billion, uh, and that's going higher.
So that seemed to spook investors.
You know, Google raised it to 91 to
93, so 20 billion more, and mentioned
that they expect more in 2026, but
the market rewarded them for that.
And the question is why I think from
an investor's point of view is that
Google's spend potentially looks.
More productive.
You know, they're not just building
infrastructure for themselves.
They're building also to sell, you know,
their cloud business, again, is monetizing
that investment with backlog up 46%.
And, you know, companies like Anthropic,
one of the, the, the leading labs out
there committing to use Google's tpu.
So there's a clearer
distinction between CapEx.
Two people buying AI related tools,
whether it's again, the Gemini app with
300 million paid subs to people, uh,
buying compute and that accelerating.
Now again, not to make this meta,
'cause I have a whole conversation
on meta on the other podcast for, you
know, seven minutes, but meta grew 26%.
Google grew 15.
So again, you look at that
and it's hard to say that.
You know, meta being the second fastest.
Mag seven behind Nvidia isn't seeing
benefits from, um, from AI of any sorts.
Um, back to AI and Google is those
TPUs, you know, they're purpose-built
chips that compete indirectly to
some degree with Nvidia and a MD.
Uh, there's kind of like a
frenemy relationship with that.
All of that that gives Google alphabet
leverage across both cost and performance.
I think that matters a lot.
They own the stack from the
data centers to the models.
You know, they, they own, they, they
acquired DeepMind years ago and, and
they also have the consumer related apps.
So while, you know, meta is spending,
that's showing up in terms of like ad
spend and stuff like that, it doesn't
feel direct, like directionally connected.
But you know, in theory it is.
And then Google spends to really
monetize both internally and externally.
And I think the market's trusting that.
Um, again, if we, we zoom back, you
know, as AI interfaces multiply.
Does Google Search Bar eventually face
a, you know, this day of reckoning?
My view is no.
Our firm view is no, again,
not a recommendation.
But, you know, we think Google
is not having a day of reckoning.
They're having a reinvention.
Uh, we see that time and time again with
some of the best companies in the world.
Google's been AI first
since it acquired DeepMind.
They're still early.
You know, this is still an early endeavor.
Um, but it's happening pretty fast.
Um, now.
I think to conclude here is, you know,
the market's read on this is, you know,
revenue's accelerating search, YouTube and
cloud are all outperforming AI adoption,
growing, not necessarily cannibalizing.
You look five, seven years, I feel still
think there's a question mark there in
the eyes of investors, you know, some
buy-side firms that I talked to as well.
CapEx is rising but seen as more strategic
versus, you know, some of its peers.
And you know, regulatory
still is an overhang.
AI is still somewhat of an overhang on
the consumer side and ultimately I think
that is, you know what this is about.
Google had a great quarter and I think
many of these hyperscalers are all
gonna have, you know, good quarters.
And that is it for this
postmortem on Google.
Good quarter, 46% backlog,
I think is the story here.