Loomis Sayles Global Growth Fund on Alphabet
Thesis
Alphabet combines Google's dominant global search and advertising franchise with a rapidly growing cloud business and significant AI capabilities. The team believes AI investment is already strengthening search engagement, YouTube content creation, advertising and Google Cloud, where quarterly revenue growth accelerated sharply and backlog expanded. Google's scale, technical talent and ecosystem provide durable competitive advantages while strong operating margins and cash generation fund continued reinvestment. Loomis Sayles believes market expectations underestimate Alphabet's sustainable long-term growth and that the shares trade at a significant discount to intrinsic value.
“We believe market expectations underestimate Alphabet’s long-term sustainable growth rate.”
Key risks
- Capital expenditure has risen substantially and has reduced near-term free cash flow
- Network advertising revenue has been declining
- Other Bets businesses remain early stage and their results are volatile