Analysts see more improvement ahead for Alphabet after latest earnings report

Published Wed, Apr 26 20238:52 AM EDT

Analysts are upbeat after better than expected quarterly results from Google parent company Alphabet . Results released postmarket Tuesday marked the first time Alphabet surpassed consensus expectations in four quarters . The YouTube owner beat on both earnings per share and revenue, reporting $1.17 (against a $1.07 estimate) and $69.79 billion ($68.9 billion estimate), respectively. Despite a challenging macroeconomic environment that has caused companies to pull back advertising, Alphabet also beat analyst expectations on ad revenue. Alphabet's chief financial officer, Ruth Porat, noted that forward guidance remains uncertain as macro headwinds continue to afflict top line ad spending. Alphabet stock gained more than 3% in extended trading after the earnings beat. Shares have gained 17.1% since the start of the year. GOOGL YTD mountain Shares of Alphabet gained after a quarterly earnings beat on Wednesday. "Revenue uncertainties continue, but we see these as cyclical versus secular, and we think street will see better evidence of cost cutting driving margin improvement by 2Q," Bank of America analyst Justin Post wrote on Wednesday. The firm raised its target price for Alphabet stock to $128 per share from $125, representing about 23% upside. Jefferies noted that while investors had expected a worst case scenario from Alphabet, the company's cloud sector was able to meet expectations despite customers slowing consumption. "We were encouraged by the resiliency in Search, relative strength in Cloud (+28%) despite ongoing cost optimization, and recovering op margins. While macro remains tough, we see the possibility that Q4 might have marked the bottom in y/y rev growth," Jefferies analyst Brent Thill wrote in a Tuesday note. Meanwhile, Morgan Stanley thinks Alphabet "remains an underappreciated AI leader," and the firm raised its price target to $140 per share from $135 on Wednesday, which equates to about 35% upside from the stocks last closing price of $103.85. Goldman Sachs pointed out the success of YouTube's growth in its live TV segment, and also noted strong revenue from Google Cloud and the company's ability to outperform margin estimates two quarters in a row. "We expect GOOGL shares to continue to build its short-term momentum as company specific events (Google I/O, Google Marketing Live, etc.) take place in the next 4-5 weeks and will likely highlight elements of product innovation and evolution (especially with a recurring backdrop of deploying AI more broadly across the company's product portfolio)," Goldman's Eric Sheridan wrote on Wednesday. JPMorgan pointed to the growth of Alphabet's investments in artificial intelligence, as well as the potential for more integration across products for Bard. "AI Core to GOOGL & Advances Continue. We continue to believe GOOGL is well positioned in AI through years of investments across its business lines & it is accelerating efforts around commercialization of LLMs [language learn models]," JPMorgan analyst Doug Anmuth said. — CNBC's Michael Bloom contributed to this report.