Alphabet’s fourth quarter revenue missed expectations, causing its shares to drop by 8% in pre-market trading. The company attributed the miss to softer-than-expected sales in cloud services and a deceleration in business from the previous quarter.
Cloud services, similar to rival Microsoft’s latest earnings, were underperforming, with CFO Anat Ashkenazi citing “capacity constrained” growth despite strong demand. Investors are concerned about the company’s $75 billion capital expenditure plans for 2025, which is significantly higher than previously expected.
However, Alphabet’s lucrative search business saw a 13% increase in revenue during the quarter, and YouTube ad sales also rose by 13.8%. Analysts at various firms have provided mixed reactions to the earnings report, with some maintaining their neutral or buy ratings despite the cloud revenue miss.
DA Davidson Analyst Gil Luria reiterated his Neutral rating and $200 price target, citing benefits from Alphabet’s integration of AI throughout its product portfolio. Pivotal Research Group Analyst Jeffrey Wlodarczak maintained a Buy rating and $225 price target, suggesting that the stock is “reasonably” selling off due to slower-than-expected cloud growth.
JP Morgan Analyst Doug Anmuth downgraded his price target from $232 to $220, citing concerns about 2025 capital expenditure plans, cloud revenue trajectory, and costs/margin expansion potential. RBC Analyst Brad Erickson reiterated his Outperform rating and $235 price target, arguing that the AI search bear case is being kept at bay by the company’s accelerating AI rollout.
Despite the mixed reactions from analysts, Alphabet’s shares continue to be affected by concerns over its cloud business and capital expenditure plans. Investors will likely keep a close eye on the Yahoo Finance analysis section of Alphabet’s ticker page for updates on sales and profit estimates after the earnings report.
Source: https://finance.yahoo.com/news/alphabet-stock-gets-rocked-after-cloud-computing-and-spending-surprise-what-wall-street-is-saying-102826611.html