According to the Q3 2025 investor letter released by Artisan Partners, the "Artisan Value Fund" underperformed its benchmark despite a persistent rally in the equity markets. However, Alphabet Inc. (GOOG), a long-time holding, emerged as the top contributor, driven by explosive growth in its AI and Cloud segments. While the fund maintains confidence in Alphabet's fundamentals, it executed some profit-taking to manage risk following the stock's recent surge.
1. Market Context & Fund Performance
Market Backdrop: The equity market rallied in Q3 2025 as investors shrugged off tariff concerns, buoyed by strong corporate earnings, rising AI investment, and prospects of supportive US fiscal policy and lower interest rates.
Performance Gap: Against this backdrop, the Artisan Value Fund returned between 0.83% and 0.91%, significantly underperforming the Russell 1000 Value Index, which posted a 5.33% return.
2. Key Holding Analysis: Alphabet Inc.
Alphabet was the fund’s top performer for the quarter, highlighting the following achievements:
Record Revenue: Total revenue grew 14% year-over-year, marking the company's first-ever $100 billion revenue quarter.
AI & Cloud Momentum: Cloud revenue jumped 32% year-over-year as AI monetization accelerated. Users of the Gemini chatbot grew to 450 million, up from 350 million in March.
YouTube Strength: YouTube continued its strong growth, remaining the No. 1 streaming platform in the US based on watch time.
3. Investment Strategy & Valuation
Valuation View: The stock is up more than 70% since its April lows and trades around 24x forward earnings. While no longer "cheap" (trading in line with the S&P 500), the valuation is still considered attractive given its strong fundamentals.
Trading Action (Profit Taking): Due to the rapid run-up in price, the position size grew significantly. Consequently, the fund sold a portion of its holdings to bring the position back to a normal weight (2–3%).
4. Hedge Fund Sentiment
Alphabet ranks as the 7th most popular stock among hedge funds. As of the end of the third quarter, 186 hedge fund portfolios held the stock, an increase from 178 in the previous quarter.
[Source] Alphabet (GOOG) Reported Strong Results Despite AI Disruption