Alphabet GOOG shares complement Li Lu's GOOGL position — together representing 44% of his portfolio in the dominant knowledge-compounding machine of the digital age
Li Lu
Himalaya Capital
Est. ~7.5% of total portfolio
“The way to think about investing is to find something you really understand deeply. And if you understand it deeply enough, you'll know how much it's worth.”
The Business
- Alphabet is the parent company of Google, operating the world's dominant search engine (90%+ global share), YouTube (2.5B MAU), Google Cloud (#3 cloud platform), and Android (3B+ devices)
- Revenue is primarily driven by digital advertising (~77%), with Google Cloud and other bets contributing growing shares
- FY2025: $403B revenue, $132B net income, 32% operating margin, $73B free cash flow
- The company operates DeepMind, one of the world's most advanced AI research labs, and has integrated Gemini AI across all products
Why They Own It
“The way to think about investing is to find something you really understand deeply. And if you understand it deeply enough, you'll know how much it's worth.”
- Combined GOOGL+GOOG represents 44% of Li Lu's portfolio — his single largest conviction bet on Alphabet's dominance across search, video, cloud, and mobile OS
- Google Search maintains 90%+ market share with 25 years of accumulated data and AI training advantages — the ultimate knowledge monopoly
- FY2025: $403B revenue (+15%), $132B net income (+32%), $73B free cash flow — accelerating profitability from AI momentum
- DeepMind/Gemini represent the most valuable AI assets in the world, with optionality valued at near-zero in the stock price
- At 28x earnings with 15%+ growth and $73B FCF, Li Lu is paying a fair price for a business with a multi-decade compounding runway
What the investor sees
GOOG trades at approximately $178/share, or 28x trailing earnings. Li Lu sees Alphabet as a knowledge-compounding machine — the more data it processes, the better its AI models become, which attracts more users. At 15%+ revenue growth and 32% operating margins, the earnings growth justifies the multiple. The key insight is that AI enhances rather than disrupts Google's business — Gemini integration into Search increases engagement and monetization rather than cannibralizing it.
Financial Snapshot
$403B
revenue FY2025
$132B
net income
$10.82
eps
32%
operating margin
$73B
free cash flow
15% YoY
revenue growth
90%+
search market share
2.5B
youtube mau
The Moat
- Search monopoly — 90%+ global market share with 25 years of accumulated search data and AI training advantage
- YouTube dominance — 2.5B MAU, largest video platform, irreplaceable creator ecosystem
- Android ecosystem — 3B+ active devices, controlling the mobile OS layer
- Data flywheel — more users generate more data, which improves AI models, which attract more users
- DeepMind/Gemini AI — 15+ years of accumulated AI research creating potentially the most valuable AI assets globally
- Distribution moat — default search deals with Apple, Samsung, and browsers lock in distribution
What Could Go Wrong
Antitrust/regulatory action — DOJ case could force structural remedies like ending default search deals with Apple
AI disruption narrative — ChatGPT and other AI chatbots competing for search queries, though Google's share remains 90%+
Massive AI capex ($50B+) with uncertain returns if AI investments don't generate proportional revenue
Advertising cyclicality — 77% of revenue from ads creates exposure to economic downturns
Catalysts
- Gemini AI monetization across Search, Workspace, and Cloud products
- Google Cloud inflection — growing 30%+ to $40B+ annual run rate
- Waymo autonomous vehicles — market leader with 150K+ paid rides per week
- Capital return acceleration — $70B buyback authorization, 2-3% annual share count reduction
- YouTube Connected TV and Shorts monetization expanding ARPU
In Their Own Words
“Knowledge compounds. The more you know about a business, the more you can know. And that compounding of knowledge is the real edge in investing.”
“Charlie taught me that it's far better to buy a wonderful business at a fair price than a fair business at a wonderful price. The key insight is that truly great businesses are rare, and when you find one, you should concentrate.”