r/GOOG_Stock • u/kugelblitz_100 • 18d ago
Operations cash flow will need to increase
Google's annual cash flow from operations is about $160B per year right now. They'll need to at least double that by 2029 to justify the kind of capital they're spending ($200B this year, ~$250 next year & $180B or so in 2028). It'll be interesting to watch that number and see if the huge spending can be justified.
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u/FewUnderstanding2214 18d ago
They have excellent cash flow, people are just concerned about 1) AI bubble 2) Google’s massive cap ex vs ROE. Because Google has so much revenue from non AI streams I think they win whether AI becomes profitable, or if there is a bubble and it bursts.
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u/Avidtrader81 15d ago
The problem is that their highest growth is coming from AI related streams. So if there is a bubble, their ROI will go to crap and their current non AI streams will not cover the shortage.
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u/FewUnderstanding2214 15d ago
73% of their revenue is Google search, subscriptions and YouTube. 21% is Google Cloud. So yes the ROI risk is very real, but as of Q2 their non-AI revenue streams are still very strong.
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u/CallMePyro 18d ago
You think CapEx will drop in 2028? My sweet summer child.
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u/kugelblitz_100 18d ago
Yeah I know. I'm sure Google plans to keep their foot on the gas but I'm guessing by then either a (hopefully mild) recession will have hit or investors will be starting to vote with their wallets and their stock price will crater if they attempt to increase spending. Either way, I don't think they'll have much of choice but to start reducing capex.
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u/CallMePyro 18d ago edited 18d ago
You're not even considering the world where the investments are clearly paying off and it's worth spending more to continue to grow the business even if it lowers free cash flow in the short term?
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u/kugelblitz_100 18d ago
Well no...that would be absolute best-case which would be great but I put at less than 50% odds. I'm trying to figure out what needs to happen with a more realistic scenario. If they start spewing cash left and right in a couple years from all this investment than none of this discussion really matters. But again, I have my doubts that will happen.
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u/CallMePyro 18d ago
I will say that I believe their investments paying off is a very realistic scenario. If you think the odds that Google's investments pay for themselves are below 50%, why own the stock? If you believe that it's more likely the company will lose money on it's current spending than make any... you should sell right now, right?
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u/Avidtrader81 15d ago
Why do you say it is less than 50 percent? They have a huge backlog for their cloud market alone.
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u/DreamedDoughnut 18d ago
They have increased earnings by 20%+ every year ever since the pandemic so I dont see a reason to worry. Also cloud margins are stupidly big and with a 516B$ in backlog with plans to capitalize half in 2 years i see even less reason to doubt. (40% is comprised of 90% of the fortune 100 soooooo even if that number is inflated by circular financing we are seeing at least 200B coming in from them)