The Motley Foolยท2025-11-23 08:41Core Viewpoint - The article discusses the investment potential of Netflix and Alphabet, highlighting that while both companies are benefiting from shifts in video consumption and internet usage, their business models and valuations suggest different investment prospects [3][12]. Group 1: Netflix Overview - Netflix's Q3 revenue increased by 17% year over year to approximately $11.5 billion, with expectations for similar growth in Q4 [4]. - The company anticipates its full-year operating margin to rise to around 29%, up from 27% the previous year [4]. - Netflix's advertising-supported plans are growing rapidly, with management projecting that advertising revenue will more than double by 2025 [6]. Group 2: Alphabet Overview - Alphabet's Q3 revenue grew by 16% year over year to about $102.3 billion, driven by strong performance in Google Search, YouTube, subscriptions, and cloud computing [8]. - The company's cloud business is experiencing significant growth, with a 46% increase in cloud backlog quarter over quarter, reaching $155 billion [11]. - AI is positively impacting Alphabet's business, particularly in its cloud segment [10]. Group 3: Comparative Analysis - Netflix is heavily reliant on subscription video, requiring substantial investment in original and licensed content, while Alphabet benefits from user-generated content on YouTube, reducing funding needs [7][11]. - Netflix has a price-to-earnings ratio of around 44, whereas Alphabet's is closer to 29, indicating that investors pay less for each dollar of Alphabet's earnings [12]. - Alphabet's diversified business model and lower valuation make it appear as the more attractive investment option compared to Netflix [12].