Google and Visa CC - Q3 2024
Google and Visa CC - Q3 2024
Main takes and thoughts from Conference Calls
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Hello, reader!
Google and Visa just released their earnings. I listened to their respective Conference calls and noted down some interesting takes and thoughts.
🔎 GOOGLE
Performance and AI Advancements
Revenue Growth: +15% Y/Y at $88.3B run rate
👉 Driven primarily by double-digit growth in both Search (+12% Y/Y at $49B) and Cloud (+35% Y/Y at $11.4B) 🟢
AI Leadership:
👉 CEO, Sundar Pichai, highlighting Google’s “full-stack” AI strategy, combining infrastructure, research, and global reach, to position Google as a front-runner in AI.
👉 Key AI advancements include their custom Gemini models and advanced TPUs, which have lowered machine cost per AI query by over 90% in 18 months. CEO saying, “We’re using AI internally to increase productivity across the board”, and noting over 1/4 of Google new code is now generated by AI. 🟢
Product Innovations
Google Search: New AI tools like Circle to Search and AI Overviews. AI Overviews were launched in over 100 new countries this quarter, reaching 1B users. According to Pichai, “Users are asking more complex questions,” which drives higher engagement and satisfaction.
YouTube: Achieved over $50B in combined ad and subscription revenue over the past four Qs. YT Shorts (70% of channels post Shorts), AI recommendations and NFL Sunday Ticket are driving more user engagement, especially premium TV. 🟢
Google Cloud: +35% Y/Y, driven by high demand for AI infrastructure and Vertex AI platform. Customers using Gemini models, seeing significant boosts in engagement and faster, more accurate decision-making. Google Workspace AI applications also have good feedback, with 75% of daily users saying Gemini enhances their work. 🟢
Investments and Efficiency
AI and Infrastructure: CapEx in Q3 at $13B, focused on servers (including TPUs and GPUs) and data centers. CFO emphasized that while investments will keep growing, they are managing costs and improving CapEx efficiency, noting data center investments will drive revenue in the near term. 🟢
Cost Optimization: Significant steps in reengineering costs, reflected in 32% operating margin this Q. CFO saying, “We’re driving efficiencies to fuel our growth while investing in AI and technical infrastructure.” 🟢
Autonomous Vehicles and Other Bets
Waymo achieved 1M autonomous miles per week and 150K paid rides, making it the leader in the AV industry. Pichai saying, “We’re the clear technical leader within the autonomous vehicle industry and creating a growing commercial opportunity." 🟢
Expanding in cities like San Francisco where they recently launched partnerships with Uber and Hyundai. Pichai noted that Waymo’s progress reflects “cutting-edge AI that’s on track to redefine transportation.”
Regulatory Challenges and Market Trends into 2025
DOJ Case: Pichai saying Google’s competitive edge due to innovation and quality, stating, “People choose Google because it’s the best product.” They will defend themselves, don’t want to lose ground. 🟠
Consumer and Advertising Trends:
Strength in ad revenues across verticals, particularly in financial services, retail, and younger demographics on platforms like YouTube Shorts.
Google’s Chief Business Officer emphasizing AI’s ability to improve ad targeting and AI Overviews potential to help monetize previously untapped queries. 🟢
Pichai calling 2025 a year of “continued innovation and impact across every product line.”
🧠 Main Thoughts
So many things to like on this print and this call… and so many people (including the DOJ) trying to “kill” Google. Keep trying, I’ll keep adding more.
💳 VISA
Financial Performance
Revenue and EPS Growth: $9.6B revs, +12% Y/Y and +16% EPS 🟢
👉 Growth driven by expansion across consumer payments, non-consumer payment flows, and value-added services. Also due to lower-than-anticipated incentives and favorable currency impacts.
Consumer Payments: Over 4.6B credentials and 11.5B tokens. Global merchant locations more than 150M, with Europe seeing a notable boost aided by Paris Olympic Games promotions.
New Flows: Visa Direct transactions up by 38% and commercial payments volume reaching $1.7T. Also, Visa is growing its presence in B2B through partnerships, such as one with JPMorgan Chase for virtual cards in Europe, and a deal with Adyen to support online travel agencies. 🟢
Value-Added Services: Revs increased +22%. Growth in this segment driven by risk solutions, AI-based fraud management, and Visa Consulting and Analytics, which generated $5 billion in additional client revenue. 🟢
Strategic Initiatives and Tech Innovation
Visa is pushing for their account-to-account (A2A) payments solutions. High potential, particularly in the UK, where they plan to launch Visa A2A in 2025. CEO describes it as a "safe and simple A2A payment, open to any eligible bank, fintech, or biller" and initially focusing on bill payments.
Also aiming to integrate more AI tools into its operations, a move reinforced by recent acquisition of Featurespace, an AI-driven fraud prevention firm. CEO saying, "We are adopting AI aggressively across our company", and highlighted that AI will drive both productivity and competitive differentiation, mentioning the potential for enhanced fraud prevention through Featurespace’s advanced tools.
Regional and International Growth
Growth across regions:
U.S. payment volumes +5% Y/Y and international payments growing 10%. 🟡
Europe and Latin America performing really well, with Visa’s Latin American operations achieving +24% Y/Y. 🟢
Asia-Pacific region saw only a marginal improvement, with growth hindered by China’s slower economic recovery. 🟠
Recent deal renewals in several global markets, including partnerships with RBC in Canada, US Bank, and USAA in the U.S., and an expanded relationship with Intesa Sanpaolo in Italy.
Regulatory Landscape and Visa’s Response
Addressing its ongoing regulatory challenges, including the recent lawsuit by the U.S. Department of Justice. CEO criticized the lawsuit, describing it as "meritless". He reassured investors that they are “confident in navigating these regulatory landscapes effectively.” 🟠
FY2025 Guidance
Net Revs Growth: High single to low double digits, with stronger growth in the second half due to timing of pricing adjustments and incentives. 🟡
EPS Growth: High end of low double digits, supported by revenue growth, cost management, and share buybacks. 🟡
Operating Expenses: Expected to rise in the high single to low double digits, with investments in new flows, value-added services, and global expansion. 🟢
Incentives: Projected to grow as a larger portion of volume renewals (~20%) takes effect, especially in Q1.
Non-Operating Income: Between $150M-$200M, based on anticipated lower interest rates.
🧠 Main Thoughts
Earnings were solid as usual, compounding steadily with revenue growth in the high single to low double digits and EPS growth in the mid-double-digit, while maintaining high operating margins.
The brighter spot is Visa’s multi-front strategy: strengthen its consumer payment solutions, expand into A2A and B2B spaces, and drive more revenue through value-added services. CEO also seemed confident in overall consumer health trends for next year, as the company invests to capture new market opportunities, including AI, while navigating regulatory scrutiny into 2025.
Visa’s dominance is supported by its vast, highly efficient network and its scale-driven cost advantage. A long-term compounder that just keeps compounding and winning.
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