Alphabet: Q4 Revenue Miss Spurs Stock Sell-off
Alphabet (GOOGL) faces a downturn following a fourth-quarter revenue shortfall. Shares plummeted 8% in pre-market trading after the earnings miss. The culprit lies in weaker-than-expected cloud services sales, echoing Microsoft's recent report, and a slowdown compared to the previous quarter.
Analyst Commentary
DA Davidson
* Rating: Neutral (Reiterated)
* Price Target: $200 (Reiterated)
* Notes: Maintains rating despite revenue and decelerating Google Cloud growth. Highlights AI integration benefits and capacity constraints as headwinds for Google Cloud.
Pivotal Research Group
* Rating: Buy (Reiterated)
* Price Target: $225 (Reiterated)
* Notes: Praises strong search and YouTube revenue, but highlights concerns over cloud deceleration and elevated capital expenditures. Emphasizes the long-term upside of cloud adoption, bolstered by AI development.
JP Morgan
* Rating: Overweight (Reiterated)
* Price Target: $220 (Lowered from $232)
* Notes: Raises concerns about elevated 2025 capex, cloud revenue trajectory, and potential margin expansion challenges. Reduces 2025 operating income estimate and assumes a more modest margin expansion.
RBC
* Rating: Outperform (Reiterated)
* Price Target: $235 (Reiterated)
* Notes: Believes cloud miss likely due to capacity constraints. Emphasizes accelerating AI rollout, upcoming Google I/O announcements, and lowered margin expectations. Views the model reset as an opportunity.
Key Points
* Cloud services sales fall below expectations.
* Lucrative search business continues to grow at 13%.
* YouTube ad sales rise 13.8%.
* Alphabet plans to invest $75 billion in capital expenditures for 2025, higher than estimates.
* Concerns outweigh AI integration benefits.