Alphabet, the parent company of Google, impressed investors with its Q3 results.
It hasn’t been a great quarter for Magnificent 7 stocks, at least according to investors. Of the four that have reported earnings so far, only one, Alphabet (NASDAQ:GOOG) saw its stock price rise after releasing results.
Alphabet, the parent company of Google, saw its stock price rise about 7% on Thursday at the opening bell, only to fall back to $284 per share as the day wore on, but still up about 3% on the day.
This jump also came on a day when the Nasdaq Composite was off about 340 points, or 1.4%, and the S&P 500 fell 61 points, or 0.9%.
The catalyst was a strong third quarter earnings report that beat analysts’ expectations.
- Revenue: $102.3B, up 16% year-over-year. This beat estimates of $99.9B.
- Net income: $35B, up 33% year-over-year.
- Operating income: $31.2B, up 9% year-over-year.
- Earnings: $2.87 per share, up 35% year-over-year. That beat estimates of $2.28 per share.
Alphabet got most of its revenue from Google Services, which saw revenue climb 12% to $87 billion. Google advertising accounted for most of that, as it contributed $74.2 billion in revenue, a 13% increase.
Google Cloud had a strong quarter as well, as revenue grew 34% to $15.2 billion. Operating income skyrocketed 89% to $3.6 billion. Google Services remains the cash cow, generating $33.5B in profit, up 9% year-over-year.
Magnificent 7 Stock Performance Over 24 Hours
| Ticker | Company | Price | Change | % Change |
|---|---|---|---|---|
| AAPL | AAPL (Apple Inc.) | $271.40 | +$1.53 | +0.57% |
| MSFT | MSFT (Microsoft Corp.) | $525.76 | −$15.58 | −2.88% |
| GOOGL | GOOGL (Alphabet Inc.) | $281.48 | +$6.97 | +2.54% |
| AMZN | AMZN (Amazon.com Inc.) | $222.86 | −$7.53 | −3.27% |
| NVDA | NVDA (NVIDIA Corp.) | $202.89 | −$4.03 | −1.95% |
| META | META (Meta Platforms) | $666.47 | −$84.86 | −11.29% |
| TSLA | TSLA (Tesla Inc.) | $440.10 | −$21.45 | −4.65% |
“Terrific” quarter for Alphabet
In addition, Google Cloud has tons of business in the pipeline, ending the quarter with $155 billion in backlog, up $49 billion from the previous quarter.
Alphabet had a terrific quarter, with double-digit growth across every major part of our business. We delivered our first-ever $100 billion quarter,” Sundar Pichai, CEO of Alphabet, said. “Our full stack approach to AI is delivering strong momentum and we’re shipping at speed, including the global rollout of AI Overviews and AI Mode in Search in record time … The Gemini App now has over 650 million monthly active users.”
In Q4, CFO Anat Ashkenazi said the company could see unfavorable comparisons in Google Advertising compared to Q4 2024 due to high election spending a year ago. But the strong momentum should continue in Google Cloud.
Like the other Mag 7 firms, Alphabet is boosting its capex spending, but it was not viewed negatively by the market. The firm is now anticipating $91 billion to $93 billion in capex spending in 2025, up from our previous estimate of $85 billion. And Ashkenazi said Alphabet anticipates a significant increase in capex spending in 2026.
In Q3, Alphabet spent $24 billion on capital expenditures investing mostly in technical infrastructure. More specifically, approximately 60% of that investment was in servers while 40% in data center and networking equipment.
Alphabet stock got a slew of price target upgrades, including one from JP Morgan, which boosted it to $340 per share.
Alphabet stock looks good with its backlog, robust investment, and relatively cheap valuation, trading at 26 times earnings.
