Alphabet Stock Jumps 4% on Strong Earnings, AI Investment

Alphabet (GOOGL) shares surged 4% in Thursday trading after the tech giant delivered a comprehensive earnings beat for the third quarter, exceeding expectations across key financial metrics and signaling a significant uptick in capital expenditure for the remainder of the year. This performance has reignited investor confidence in Alphabet’s strategic direction, particularly its aggressive push into artificial intelligence and the sustained momentum of Google Cloud.

The driving force behind this increased spending is Alphabet’s commitment to building out its AI infrastructure. The company has revised its capital expenditure guidance upwards, projecting investments between $91 billion and $93 billion, a substantial increase from the $85 billion previously anticipated. This adjustment reflects the robust demand for Google Cloud services and the escalating need for high-performance computing resources to support cutting-edge AI models and applications.

CEO Sundar Pichai underscored the strength of Google Cloud’s growth trajectory, revealing a substantial backlog of $155 billion at the close of the third quarter. This figure represents secured future revenue and indicates a strong position in the competitive cloud computing landscape, where Alphabet is vying for market share against Amazon Web Services (AWS) and Microsoft Azure.

Furthermore, Chief Financial Officer Anat Ashkenazi provided a glimpse into Alphabet’s long-term investment strategy, indicating that capital expenditure is expected to increase “significantly” in 2026. This forward-looking guidance signals a sustained commitment to innovation and infrastructure development, reinforcing Alphabet’s position as a technology leader poised to capitalize on future growth opportunities.

Deutsche Bank analysts, in their post-earnings analysis, highlighted the absence of any significant negative signals in the report, characterizing it as a “virtually no hair on the print” performance. They noted the challenging backdrop against which these results were achieved, considering the stock’s impressive 43% rise since the release of second-quarter earnings, suggesting the company has continued to validate investor optimism.

Alphabet’s third-quarter earnings reached $3.10 per share adjusted, with revenue hitting a record $102.35 billion – marking the first time the company has surpassed the $100 billion revenue threshold in a single quarter. These figures outperformed consensus estimates, which had projected earnings of $2.33 per share on revenue of $99.89 billion, according to analysts polled by LSEG.

The combination of strong financial performance and escalating capital expenditure has resonated positively with market analysts, reaffirming Alphabet’s standing as a dominant force and a key player in the evolution of AI.

Goldman Sachs, in its assessment, noted that Alphabet has successfully navigated investor concerns surrounding AI over the past year. “We continue to see multiple fronts where Alphabet has climbed a steep wall of worry in the past 12 months around the AI theme and don’t see any reasons to suspect a pause or step back in terms of its operating proof points to change investor perception,” the firm stated, reflecting growing confidence in Alphabet’s AI strategy and execution.

In light of these positive developments, Goldman Sachs has raised its price target on Alphabet to $330, up from a previous target of $288, expressing optimism about the company’s future prospects.

Analysts are also closely observing the impact of AI on Google Search, a core business that generates a significant portion of Alphabet’s revenue. The performance of the search division is seen as a critical indicator of the company’s ability to adapt to the shifting technological landscape and capitalize on AI-driven opportunities.

Google’s search revenues reached $56.56 billion for the quarter, representing a 15% year-over-year increase. This performance suggests that the integration of AI into search is not cannibalizing existing revenue streams, and perhaps is enabling higher user engagement and monetization.

JPMorgan analysts, echoing the sentiments of other firms, believe that the long-term impact of AI on search is more likely to be positive than negative. “The AI search transition has been viewed as the greatest risk to Google, but additional signs that AI search is more opportunity than threat will continue to flip the narrative,” they wrote, expressing confidence in Alphabet’s capacity to transform the perceived threat of AI into a source of competitive advantage and revenue growth.

Consequently, JPMorgan has raised its price target on Alphabet from $300 to $340, further signaling Wall Street’s confidence in the company’s trajectory.