Munster: 'Google Is Betting On The Right Long-Term Trends'

The statement should allay some investor concerns about ballooning traffic acquisition cost at the company, which along with profit taking following react gains soured sentiment toward the stock.

Alphabet's Class A shares were down about 3 percent in reaction to the results.

Munster termed the stock reaction as a classic example of investors' shortsightedness, which makes them focus on near-term bumps. Instead, the analyst suggested focusing on long-term positives.

Listing the positive themes of the quarter, Munster included:

Stable Revenue Growth

Loup Ventures noted that Google's revenue rose 21 percent year over year in the second quarter. This was in line with the 20–20 percent revenue growth seen over the last five quarters, defying expectations that growth would slow.

Aiming High With AI

Munster mentioned CEO Sundar Pichai's reference to AI for the third successive earnings call. On the most recent call, Pichai said, "Google continues to lead the shift to AI driven computing."

In the first quarter, Pichai's statement on AI said, "I'm really happy with how we are transitioning to an AI-first company."

Meanwhile, on the fourth-quarter earnings call, the CEO said, "Computing is moving from mobile — first to AI — first with more universal, ambient and intelligent computing that you can interact with naturally, all made smarter by the progress we are making with machine learning."

Munster believes the AI-focus would help Google to have better, more targeted search results for consumers, higher ROI for advertisers, lay the groundwork for natural language processing, seen as the future of Google Home and Assistant, and improve computer vision-based search.

Heavy AR/VR Investments

Munster noted that Google is taking the long-term approach to Google Lens, the foundation for its future in Augmented Reality. This would help as new computing form factors emerge that uses different input methods than merely taking the phone and snapping pictures.

"In addition, Google shared that by year end, there will be 11 Daydream-ready devices on the market. Most notably, Samsung Electronic SSNLF's Galaxy S8 and S8+ are Daydream-ready," Munster said.

At the time of writing, Google Class A shares were down 2.97 percent at $968.49 and Class C shares were sliding 2.99 percent to $951.07.