To hear Sundar Pichai tell it, Alphabet (GOOG) It has been in the artificial intelligence game for quite some time.
“We have been a pioneer in ai since 2016, pioneering many of the modern advancements that drive ai progress, for us and the industry,” said the search engine giant's CEO. told analysts during the company's earnings call.
Related: Analysts reset facebook parent Meta's stock price targets amid post-earnings slump
Those ai efforts are paying off.
Alphabet reported first-quarter earnings of $1.89 per share, up from $1.17 a year ago, and comfortably beating the FactSet consensus of $1.51 per share. Revenue rose to $80.5 billion, up from $69.8 billion a year ago, beating FactSet's forecast of $78.74 in sales.
“It was a great quarter, led by strong performance across Search, YouTube and Cloud,” Pichai said.
The company also approved its first dividend and announced a $70 billion share buyback.
“We have the best infrastructure for the ai era,” Pichai said. “Building world-leading infrastructure is in our DNA, from our earliest days when we had to design purpose-built hardware to power search.”
Pichai said it took Google more than 15 years to reach $100 billion in annual revenue, while the company has gone from $100 billion to more than $300 billion in annual revenue in the past six years. .
The success has many analysts revising their price outlook for Alphabet shares.
Google CEO: 'Using ai to improve search'
“Of course, Search continues to drive that, as seen in our first quarter results,” he said. “But also, we expect YouTube overall and Cloud to come out in 2024 at a combined annual run rate of over $100 billion.”
Pichai said Alphabet will bring ai overviews to the Search home page and “will focus on areas where ai can improve the search experience while prioritizing traffic to websites and merchants.”
Related: Analysts Struggle to Reset Tesla Price Targets as Stock Soars After Earnings
“We are encouraged to see an increase in search usage among people using the new ai overviews, as well as increased user satisfaction with the results,” he said.
Analysts reacted to the earnings results by adjusting their price targets for Alphabet shares.
Chris Versace from The Street Pro said that in response to Alphabet's strong performance in the March quarter and prospects for accelerating revenue growth, “especially in YouTube and Cloud, and continued margin expansion despite investing in ai, we are increasing our price target.” on GOOGL at $200 from $165″.
Versace noted that Google Cloud grew more than 28% from last year, a much faster pace than the 25.7% year-over-year growth rate recorded in the December quarter.
“This should allay concerns that Google Cloud wasn't gaining its share of cloud adoption, but it also speaks to the company's ai efforts,” he said.
JPMorgan's Doug Anmuth raised the firm's price target on Alphabet to $200 from $165 and maintained an overweight rating on the stock. The company reported strong first-quarter results across the board, the analyst tells investors in a research note.
The firm believes Alphabet “is starting to go on the offensive” in artificial intelligence.
“The company is starting to include ai answers on the main search results page and is seeing an increase in search engagement and satisfaction among ai users,” he said.
“Management also expressed confidence that the shift to generative ai in search will expand search market opportunities, just as GOOGL saw with the shift to mobile and voice,” the analyst added.
Anmuth said he believes Alphabet has perhaps the most diversified ai monetization path among the major ai players, with ai revenue potential in ads on Search and YouTube, Cloud, and subscriptions through Google One.
An analyst says that “Google benefits from ai“
“Very similar to what we saw with META last night,” he said, referring to Meta Platforms, facebook's parent company. (GOAL) “To support big ai ambitions, GOOGL will increase its capital spending this year, we believe to around $50 billion.”
Analysts at Bank of America Securities highlighted Alphabet's “triple lindy rate of return,” with its YouTube, search and cloud divisions exceeding Wall Street expectations.
- Cathie Wood Buys $22 Million in Battered tech stocks
- Analyst Renews Nvidia Price Target as Mag 7 Earnings Loom
- Analyst Reveals New amazon Price Target as Stock Tests $2 Trillion
Analysts raised their price target for Alphabet to $200 from $173 and reiterated their buy rating.
“The quarter exceeded expectations across all major lines of business, supporting a narrative shift: Google is an ai beneficiary,” BofA said in a research note. “Search is not yet without risks of disruption, but we remain constructive on Google's infrastructure, data and distribution advantages.”
Needham raised the firm's price target on Alphabet to $210 from $160 and maintained a buy rating on the stock.
The company cited the company's “strong” first-quarter revenue, operating income of $25.5 billion that exceeded the company's vision by 16%, and the company's $70 billion buyback and dividend initiation. company.
Needham added that YouTube would be worth almost $400 billion if it were spun off or sold separately.
TD Cowen analyst John Blackledge raised the company's price target for Alphabet to $200 from $170 and maintained a buy rating on the stock.
Blackledge told investors that Search, YouTube and cloud revenue beat estimates while increasing as the company sees broad momentum and adoption of burgeoning artificial intelligence services.
Oppenheimer raised the firm's price target on Alphabet to $205 from $185 and maintained an Outperform rating on the stock.
Alphabet's advertising business is accelerating and boosting operating leverage, despite significant investments in ai, the firm said.
All eyes are on Google I/O, the company's annual developer conference, scheduled for May 14, Oppenheimer said, and investors would likely be disappointed if the next-generation ai model isn't shown at I /EITHER.
Related: A veteran fund manager picks his favorite stocks for 2024
