Why Analysts Are Bullish on Google Parent Alphabet After Earnings

Alphabet (GOOGL), Google’s parent company, reported third-quarter earnings that beat Street expectations and showed progress in artificial intelligence (AI), with JPMorgan and Citigroup analysts pointing to the tech giant’s strong Google Cloud revenue.

JPMorgan raised its price target on Alphabet to $212 from $208 and reiterated an “overweight” rating.

The broker noted Google’s “increasing confidence” in launching its AI search business; Its strong cloud business, with revenue growing 35% year-over-year in the quarter; And upside in operating profits due to the company’s plans to “re-engineer its cost structure” as reasons behind the price target increase.

JPMorgan notes expansion of AI overview service

Google’s AI Overviews service — search summaries generated by artificial intelligence — is being rolled out in 100 new countries and territories with a reach of more than 1 billion monthly users, and “is monetizing at roughly the same rate as others,” JPMorgan analysts said. “AI searches” in terms of advertising.

On the company’s earnings call, Alphabet CEO Sundar Pichai said the company has seen a rise in Google Search usage among people using AI Overviews, and that Google Lens attracts 20 billion visual searches each month.

Citi analysts stuck to a “buy” rating and $212 price target for Alphabet. The broker, like JPMorgan, noted Google Cloud’s “accelerating growth from increased demand for GenAI,” thanks in part to Alphabet’s Gemini’s large language model.

Alphabet shares jumped more than 5% Wednesday afternoon and have gained 28% this year.