Alphabet's performance greatly exceeded expectations, with its stock price reaching an all-time high. Analysts are unanimously optimistic about its AI and cloud business
Alphabet, the parent company of Google, saw its stock price reach a historic high of $291.93 on Thursday, with third-quarter performance exceeding market expectations and profits surpassing analyst forecasts by over 20%. Year-to-date, the stock price has increased by more than 44%. Analysts believe that Alphabet has strong growth potential in AI and cloud services, with a valuation relatively lower than other tech giants, and that cloud computing and digital advertising are its dual engines of growth. Overall fundamentals support a "strong buy" outlook
According to the Zhitong Finance APP, Google's parent company Alphabet (GOOG.US, GOOGL.US) stock price reached an all-time high of $291.93 on Thursday. The company's third-quarter performance significantly exceeded market expectations, with profits surpassing analyst predictions by over 20%. Alphabet's stock price has climbed from the $140 to $150 range at the beginning of the year, with an increase of over 44% year-to-date.
Seeking Alpha analyst Jonathan Weber pointed out that Alphabet's third-quarter earnings exceeded expectations by about 27%, marking one of the largest earnings surprises in recent years. The company's revenue grew by 16% year-on-year, and operating profit increased by 10% year-on-year, demonstrating good cost control and improved profit margins.
He stated that Alphabet's valuation is still relatively lower than that of Tesla (TSLA.US), Apple (AAPL.US), Microsoft (MSFT.US), NVIDIA (NVDA.US), and Amazon (AMZN.US), making it one of the most cost-effective stocks among the "seven giants." Weber reiterated his bullish outlook, believing that Alphabet possesses strong growth potential, a wide "moat" business model, and a relatively attractive valuation.
Independent research firm The Asian Investor emphasized that cloud computing and digital advertising are the dual engines of Alphabet's growth. He noted that the company's free cash flow in the third quarter surged by 38.7% year-on-year, driven by capital expenditures in AI and cloud computing. "Alphabet's cloud revenue continues to grow at double digits, and its advertising business is performing strongly, with significant results from its AI initiatives," he stated. The Asian Investor believes that the current expected price-to-earnings ratio for Alphabet's stock is only about 25.7 times, lower than the average level of large tech stocks, indicating potential for revaluation; the only risk lies in a slowdown in corporate AI capital expenditures or weakened cash flow, but the overall fundamentals support a "strong buy" outlook.
The Techie also holds a positive view on Alphabet's long-term prospects. He pointed out that Alphabet's revenue reached a record $102.4 billion this quarter, with Google Cloud revenue growing by 34% year-on-year, and YouTube advertising performance also shining. "Alphabet is accelerating its AI strategic layout, with the integration of the Gemini model, large-scale cloud collaborations, and ongoing capital investments reinforcing its leadership in search and cloud sectors." He added that the company's diversification in cloud computing, video streaming, AI, search advertising, and autonomous driving (Waymo) is "unprecedented," laying a solid foundation for long-term growth.
Institutional analysts have generally raised the company's target price, believing that Alphabet is demonstrating a growth pattern of "multiple engines accelerating simultaneously."
Evercore ISI maintained an "Outperform" rating and raised the target price from $300 to $325, stating that the company has achieved accelerated growth across major revenue lines such as advertising, search, YouTube, and cloud computing, "almost universally exceeding expectations." Truist Securities maintains a "Buy" rating, raising the target price from $285 to $320, and emphasizes that search advertising revenue has still achieved sequential acceleration amid intensified AI competition, demonstrating strong competitiveness.
Barclays gives an "Overweight" rating, raising the target price from $250 to $315, optimistic about the revenue growth potential empowered by AI, and believes that if it can effectively address the AI competitive threats before 2026, there is still upside potential for the stock price.
Stifel maintains a "Buy" rating, noting that Google Cloud's backlog has reached $155 billion, a significant year-on-year increase, highlighting strong demand. Stifel states that Alphabet is maintaining scale growth through mature businesses such as mobile search, YouTube, and programmatic advertising, while continuously investing in cloud, hardware, and AI to build a growth engine for the coming years
