Wall Street reacts to Alphabet’s third-quarter earnings results

• Alphabet shares fell 10% on Wednesday after the company reported third-quarter earnings.
• Google’s parent company reported cloud revenue that fell short of analysts’ expectations.
• Here’s how Wall Street analysts reacted to Alphabet’s third-quarter earnings report.

Alphabet shares fell 10% on Wednesday after investors reacted to the company’s third-quarter earnings results.

While revenue and profit beat analysts’ expectations, thanks in part to strong growth in Google and YouTube’s advertising businesses, its cloud business revenue rose 22.5% to $8.41 billion, below Wall Street expectations of $8.62 billion and also lower. A quarter of the 28% growth in the second quarter.

Alphabet’s slowdown contrasted with Microsoft’s quarterly report, which showed a reacceleration of growth at its Azure cloud unit.

Here’s how Wall Street analysts reacted to Alphabet’s third-quarter earnings report.

Wedbush: ‘It’s like rooting for Michael Jordan to play baseball’

Analyst Scott Devitt said the reason for Alphabet’s sharp decline on Wednesday was uncertainty about its cloud revenue growth and lower expectations for the company’s future margin expansion.

But the share price decline “was overdone, with investors placing too much relative value on the company’s cloud business, which accounts for only about 11% of revenue and about 1% of operating income, while its core advertising business, which accounts for 78% of revenue, is Acceleration into the fourth quarter, ahead of third-quarter expectations, more than offset slower cloud growth,” he said in a note Wednesday.

“Owning Alphabet’s cloud business is like supporting Michael Jordan playing baseball,” DeWitt added.

Wedbush rates Alphabet an “outperform” rating and has a price target of $160, representing a potential upside of 26% from current levels.

Monnes Crespi-Hart: The “darkest days” are coming

Analyst Brian White warned investors that while Alphabet has a solid long-term outlook, “regulatory headwinds persist, competition is dynamic, and we believe the darkest days of this downturn are ahead of us.” “

I noticed that the company’s earnings call was “vague” at a time when investors needed clarification.

“The tone of the call was filled with evasive comments and no clear path forward at a time of increasing demand for AI investments, stronger competitors and an increasingly bleak macro environment,” White said in a note Wednesday.

Monness Crespi Hardt downgraded its rating on Alphabet to “neutral” from “buy.”

Bank of America: ‘A bad night missed on the cloud’

With Microsoft reporting strong results for its cloud business, Bank of America said it was a “bad night not to be missed in the cloud business,” but added that Alphabet’s advertising business remains solid and gains from artificial intelligence are still “early days”.

“While cloud missteps will raise concerns about its positioning in AI, Google said there will be some stabilization in the quarter, with cloud accounting for just 2% of total profits. More importantly for 2024 EPS, search and YouTube’s Strong growth suggests the advertising recovery remains strong, while product and advertiser initiatives suggest Alphabet will be a continued beneficiary of AI,” analyst Justin Post said in a note on Wednesday.

Bank of America rates Alphabet a “buy” and raised its price target to $149 from $146, representing a potential upside of 18% from current levels.