Investing.com — With the appointment of a new Chief Financial Officer, Google (NASDAQ:) is at a crucial juncture where it can improve investor communications and transparency, increasing trust and improving the market.
Morgan Stanley analysts suggest that a few targeted initiatives from the new CFO could go a long way in clarifying Google’s growth story and boosting its valuation.
By focusing on key areas such as GenAI disclosure, financial guidance, clarity on business segments and public relations, Google has the opportunity to reshape its narrative and encourage more favorable investor sentiment.
One of the most important steps Google’s new CFO could take is increasing transparency around its Generative AI (GenAI) initiatives.
As AI becomes more integrated into Google’s ecosystem, providing more detailed insights into how these technologies are performing can significantly increase investor confidence.
While Google has already started sharing some details, there is a strong case for more quantitative and qualitative disclosures that provide deeper insight into how these innovations drive revenue and engagement.
For example, Morgan Stanley notes how Meta (NASDAQ:) has been successful in offering detailed reports on engagement metrics for its Reels and AI products.
Such revelations have helped the market better understand the ROI of Meta’s investments, providing a framework that could work just as well for Google.
By offering clearer data on how GenAI is impacting user behavior and revenue growth, Google could give investors the information they need to better assess the long-term potential of these innovations, which would in turn boost confidence in Google’s growth story can strengthen.
Equally important is the need for consistent and clear guidance for Google’s financial outlook, especially regarding capital expenditure (capex), operating expenditure (opex) and revenue.
In light of heavy investments in AI, the lack of clarity around Google’s spending plans has contributed to uncertainty in the market. While some competitors, such as Amazon (NASDAQ:) and Microsoft (NASDAQ:), provide detailed quarterly updates that help investors anticipate financial swings, Google has so far made relatively vague forecasts.
For example, Google’s statement that “the risk of underinvestment dramatically exceeds the risk of overinvestment” has left a wide range of capex expectations for the future, making it difficult for investors to model free cash flow (FCF) and earnings trajectories .
By tightening its forward guidance – perhaps through capital investments or clearer operational discipline – Google could give the market a more stable view of its financial future. Consistent upward revisions to these guidelines would also indicate a well-managed and growing company, leading to increased investor confidence and likely multiple expansions.
Another key area where Google could increase investor visibility is in business segment reporting, especially for YouTube and Google Cloud.
These are important growth areas, but the current level of disclosure about them leaves much to be desired.
For example, YouTube is a platform that generates significant advertising and subscription revenue, but Google’s current messaging about it tends to underestimate its full potential.
Analysts at Morgan Stanley believe that separating YouTube’s advertising and subscription revenue and providing more detailed insight into its profitability would allow investors to better model and value the platform, especially compared to other video streaming players such as Netflix (NASDAQ:).
Similarly, within the Google Cloud segment, a clearer distinction between Google Cloud Platform (GCP) and Workspace would give investors a better understanding of how Google competes with AWS and Microsoft Azure.
Since cloud services are a key growth driver for Google, providing more detailed information here could significantly improve how investors perceive Google’s competitive position and growth potential.
Google’s new CFO could help control the public narrative by highlighting the positive social impact of the company’s products and services.
At a time when regulatory pressure and legal challenges are increasing, shifting the conversation to the benefits Google brings to users, businesses and society as a whole could counter some of the negative sentiment.
Google’s products, such as Maps and Translate, and their contributions to small businesses and developers are important, but often underplayed in the broader story.
As Morgan Stanley notes, Amazon has been effective in highlighting its social contributions, such as job creation and community investment, which has helped improve its public image.
Google could benefit from a similar approach by more actively communicating how its products positively impact billions of people around the world, from offering free mapping services to enabling life-saving medical translations.
Such efforts could not only strengthen reputation but also contribute to higher market value by aligning investor sentiment with the company’s broader value to society.
