Here's Why Alphabet (GOOG) is on Detractors' List of Loomis Sayles Global Growth Fund

Loomis Sayles, an investment management company, released its “Global Growth Fund” first quarter 2025 investor letter. A copy of the letter can be downloaded here. In the first quarter, the fund returned -3.35% compared to -1.32% for the MSCI ACWI Net Index. Stock selection in consumer staples, communication services, and healthcare sectors, and allocations to the information technology and healthcare sectors positively impacted the fund’s relative performance. In addition, please check the fund’s top five holdings to know its best picks in 2025.

In its first-quarter 2025 investor letter, Loomis Sayles Global Growth Fund highlighted stocks such as Alphabet Inc. (NASDAQ:GOOG). Alphabet Inc. (NASDAQ:GOOG), the parent company of Google, offers various platforms and services operating through Google Services, Google Cloud, and Other Bets segments. The one-month return of Alphabet Inc. (NASDAQ:GOOG) was 3.50%, and its shares lost 3.82% of their value over the last 52 weeks. On May 23, 2025, Alphabet Inc. (NASDAQ:GOOG) stock closed at $169.59 per share with a market capitalization of $2.05 trillion.

Loomis Sayles Global Growth Fund stated the following regarding Alphabet Inc. (NASDAQ:GOOG) in its Q1 2025 investor letter:

"Alphabet Inc. (NASDAQ:GOOG) is a holding company that owns a collection of businesses, the largest and most important of which by far is Google. Google is the global leader in online search and advertising and also offers cloud solutions to businesses and consumers globally, with a goal of organizing the world’s information and making it universally accessible and useful. Google dominates the US and global search market with a greater than 80% share of search volumes. As a function of seeing more searches, Google is able to provide better search results, resulting in a higher customer conversion rate for advertisers and enabling Google to capture a leading share of search revenue. Google’s large network of consumers, advertisers, and publishers is a powerful business ecosystem as third-party participants such as marketing affiliates and independent software vendors add value to the user experience. As a result, consumers get their best and most relevant search results and advertisers get the best returns on their advertising dollars. Such a robust ecosystem attracts increasing numbers of participants and thereby creates a virtuous cycle for a sustainable business model and long-term growth. In its emerging cloud business, we estimate that Google captures less than 10% market share of the global market for public cloud services. We believe Google remains one of the few global companies that has the scale, research and development (R&D), and technical talent to effectively compete in this market over the long term. Non-Google businesses comprise less than 1% of Alphabet revenues and are held in the company’s Other Bets segment.

A holding in the fund since inception, Alphabet reported quarterly financial results that were fundamentally strong and above consensus expectations for operating income, operating margin, and earnings per share. Despite a fundamentally strong quarter, shares were likely weaker as a result of cloud revenue, which was below consensus expectations and decelerated to 30% year over year growth from 35% in the prior quarter, as well as guidance for increased capital expenditures. The company expects to spend $75 billion on capex in 2025, which was over 25% higher than expected. During the quarter, the company also announced it had agreed to acquire Wiz, a leading cloud security platform, for $32 billion – which would be its largest acquisition to date. We believe Wiz will complement Alphabet’s current security solutions and enable the company to offer a unified security platform which would enable the company to secure cloud native applications starting at the development stage through application run time and providing threat intelligence, AI threat protection, cyber team support and measurable defense. The founders of Wiz previously founded and sold another cloud security business to Microsoft, before founding Wiz in 2020 and growing the company to an estimated $500 million in annualized recurring revenue in 2024, which Wiz management previously suggested could double in 2025. We believe the proposed all-cash acquisition highlights the strength of Alphabet’s balance sheet and financial resources, and will continue to monitor the approval process and assess potential incremental benefits to the company’s cloud business…” (Click here to read the full text)

Alphabet Inc. (NASDAQ:GOOG) is in 7th position on our list of 30 Most Popular Stocks Among Hedge Funds. As per our database, 164 hedge fund portfolios held Alphabet Inc. (NASDAQ:GOOG) at the end of the first quarter which was 174 in the previous quarter. In the first quarter of 2025, Alphabet Inc. (NASDAQ: GOOG) achieved a revenue of $90.2 billion, representing an increase of 12% or 14% in constant currency. While we acknowledge the potential of Alphabet Inc. (NASDAQ:GOOG) as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as NVIDIA but that trades at less than 5 times its earnings, check out our report about the undervalued AI stock set for massive gains.

In another article, we covered Alphabet Inc. (NASDAQ:GOOG) and shared Weitz Multi-Cap Equity Fund's views on the company. ClearBridge Large Cap Value Strategy noted in its Q1 2025 investor letter that Alphabet Inc.'s (NASDAQ:GOOG) stock price decreased as the market shifted away from AI leaders. In addition, please check out our hedge fund investor letters Q1 2025 page for more investor letters from hedge funds and other leading investors.

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Disclosure: None. This article is originally published at Insider Monkey.