Hi YXI friends,

The YXI Profile aims to provide a complete overview of the asset's historical fundamentals, forward estimates, and quantitative characteristics.

It may be particularly relevant to long-term investors who want to look past the daily noise and news headlines and understand how their assets behave over the long term.

All of the charts in this note were developed using proprietary analytical tools to provide a unique set of insights for YXI Premium subscribers.

We update this note every quarter, one business day after the earnings report. The goal is to create a long-term rolling report on the asset so you can easily look back on what happened before.

DISCLAIMER: This newsletter is strictly educational. Any information or analysis in this note is not an offer to sell or the solicitation of an offer to buy any securities. Nothing in this note is intended to be investment advice and nor should it be relied upon to make investment decisions. Any opinions, analyses, or probabilities expressed in this note are those of the author as of the note's date of publication and are subject to change without notice.

Revenue

GOOGL has accelerated revenue growth over the past three quarters, signalling that AI does drive tangible growth, as clients build AI applications at a furious pace on Google’s infrastructure (the same is true for MSFT and AMZN).

However, the top-line growth is only just on par with the 2024 results and nowhere near the 2021 levels, so it's definitely not quite the A+ performance just yet. GOOGL has to accelerate growth meaningfully to a mid-20% pace to justify the AI narrative further.

GOOGL’s TTM revenue has been growing at a 13-14% range for the past 18 months.

Profit Margins

GOOGL has improved its profit margins strongly in the past year. Its gross margin is up 3% since late 2023. Its EBITDA margin has grown by 16%, i.e. making 50% higher profit all else equal. It has also doubled the Free Cash Flow margin since the end of 2023.

GOOGL’s EIBTDA is clipping 30-40% growth in the past 8 quarters, which has outstripped the revenue growth by far.

CapEx

GOOGL has significantly ramped up its CapEx spending on AI infrastructure. As a percentage of revenue, CapEx spending has increased from 15% a year ago to 23% today.

In raw spending terms, that’s 83% higher US Dollar spend than a year ago.

Of course, something has to give. GOOGL has repurchased fewer shares in the past 3 quarters.

The amount spent on share repurchases in the last quarter was 19% lower than a year ago.

Here are the key financial metrics from the past four quarters. I have designed the table this way so we only focus on the key top-line, profit, and cash flow metrics.

Here are the forward estimates by Wall Street. The consensus is for GOOGL to grow revenue by 14% over the next year, with EBITDA margin slightly higher.

My read is that GOOGL must beat this consensus handsomely - even if they come just in line, the share price would be in big trouble.

Here are the key valuation metrics over time, including the NTM metrics (using today’s share price).

The valuation multiples have grown substantially since the beginning of the year, even on a growth-adjusted basis. PEG has expanded from 0.6 to 0.9x while EV/ EBITDA / Growth has expanded from 0.4 to 0.6.

GOOGL now trades more than 2 standard deviations from its 3-year valuation median. This may not be sustainable in the near term.

While GOOGL’s valuation has risen sharply, its growth over the past year has not been as meteoric.

GOOGL has seen a consecutive share price expansion for 8 months in a row (9 months if Dec also closes higher). The last time it happened was in 2009, just after the financial crisis. 2010 was a far more challenging year.

2025 is the best year of the past decade in terms of GOOGL’s YTD performance.

GOOGL suffered its two most significant drawdowns in the 2008 and 2022 bear markets. Outside of these two episodes, 20% is considered a big downturn for GOOGL.

GOOGL correlates positively with SPY but neutrally with TLT in the past 90 days.

GOOGL’s volatility is most intense in February and November. As we move towards the year-end, GOOGL can get very quiet.

GOOGL has recently traded in the RSI > 70 territory, which is considered overbought. On average, GOOGL has seen flat or negative near-term returns since 2018.

The 3-month forward returns are more promising with a 6.5% average. However, it is still better to buy when GOOGL trades with an RSI < 30, which, on average, returns 7.8% after 3 months.

Here are the previous occasions that GOOGL has traded above an RSI at 70.