Alphabet Stock Looks Poised to Rise After Its Results, Boosted Capital Spending Plan
The Google parent on Wednesday posted better-than-estimated quarterly results, driven by rising cloud and search sales, and announced it would boost AI-fueled capital spending by $10 billion this year. The company's Class A shares, which entered Thursday about flat for the year, were up more than 3% higher in premarket trading.
Some analysts turned more positive on the stock after Alphabet's results. Citi analysts raised their price target to $225 from $203—Wall Street's average is above $216, according to Visible Alpha—citing the company's 'improving Search monetization trends.' Investors have been concerned that Google's search business, a core revenue generator, was under threat from the rise of AI.
'To be clear, the broader search market continues to evolve and remains among the most competitive ever as debate on the future of Search continues,' the Citi analysts wrote.
The analysts named a list of things they said impressed them from Alphabet's results, including consumers' increasing adoption of Google's large language model Gemini and the expansion of AI Mode, which integrates an AI chatbot tool into search. CEO Sundar Pichai said on the earnings call late Wednesday that AI Mode had reached 100 million monthly active users in the U.S. and India since it was launched in May.
The analysts also said they liked the company's 'faster product cycle,' accelerating revenue from cloud operations and the growing demand for its products that led to its plan to spend $85 billion on developing AI this year, up from an earlier target.
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