Alphabet earnings are out after market close. Here's what Wall Street is watching

Alphabet, Google’s parent company, is currently experiencing a period of significant growth and investor optimism, largely fueled by its advancements in artificial intelligence. The company’s stock has seen gains of over 8% year-to-date and 64% over the last 12 months, marking a substantial recovery from earlier setbacks.

AI Driving Growth

Gemini and Beyond

This turnaround is attributed to the positive reception of its Gemini AI chatbot and image generation models. Growth is also being driven by the company’s Tensor Processing Units (TPU) business and the expansion of Google Cloud. Even Alphabet’s self-driving car project, Waymo, has attracted attention with a recent funding round valuing it at $126 billion.

Did You Know? In December, Google’s global mobile daily active users rose 12% year-over-year, while Gemini’s users increased by 351% to 62 million.

Strong Financial Performance

Analysts polled by LSEG anticipate approximately 20% earnings growth for Alphabet’s fourth quarter. This expectation follows a third quarter where the company exceeded both earnings and revenue projections, a result directly linked to the momentum of AI within its cloud business. Demand for AI infrastructure, including chips and Gemini 2.5, was a key factor in this growth.

Wall Street’s Perspective

Bullish Sentiment

The majority of analysts covering Alphabet’s stock maintain a positive outlook. Of the 61 analysts surveyed by LSEG, 16 issued a “strong buy” rating and 36 assigned a “buy” rating. However, some analysts suggest the stock may be overvalued, with the consensus price target indicating a potential 2% downside.

Expert Insight: The current market sentiment surrounding Alphabet suggests investors are placing a high premium on the company’s AI capabilities and their potential to drive future growth, but this also introduces a degree of risk if those expectations aren’t fully realized.

Price Targets and Predictions

Bank of America’s Justin Post reiterated a “buy” rating with a $370 price target, anticipating an 8% increase from the latest closing price. Post believes Google’s search and cloud businesses will benefit from increased engagement and conversion rates due to Gemini and TPU strengths. Jefferies analyst Brent Thill is even more bullish, raising the price target to $400, suggesting a potential 16.4% gain.

Other firms, including Truist, Deutsche Bank, Goldman Sachs, and Citi, also maintain “buy” ratings and positive outlooks, citing strong advertising performance, cloud growth, and the potential of TPUs and Waymo.

Competition and Partnerships

Analysts are closely watching the competitive landscape, particularly OpenAI’s ChatGPT, which had 392 million global mobile daily active users in December, compared to Gemini’s 62 million. The recent strong results from Meta have also indicated a stable advertising market, which bodes well for Alphabet. Analysts are keenly interested in the details of Google’s partnership with Apple, as a Gemini-powered Siri could expand Google’s access to user data and benefit its infrastructure business.

Frequently Asked Questions

What is driving Alphabet’s stock growth?

Advancements in artificial intelligence, specifically the Gemini AI chatbot and image generation models, along with growth in Google Cloud and the Waymo self-driving car business, are driving Alphabet’s stock growth.

What do analysts predict for Alphabet’s fourth-quarter earnings?

Analysts polled by LSEG expect Alphabet to report about 20% earnings growth for the fourth quarter.

How does Gemini’s user base compare to ChatGPT’s?

In December, Gemini had 62 million global mobile daily active users, while ChatGPT had 392 million.

As Alphabet continues to innovate in the AI space and navigate a competitive market, will its strategic partnerships and technological advancements be enough to sustain its current growth trajectory?

Alphabet earnings are out after market close. Here’s what Wall Street is watching