Alphabet reported adjusted earnings of $2.67 per share on revenue of $127.58 billion, both figures falling short of LSEG consensus estimates. This marks the first time in nearly four years that the company has missed both top and bottom line expectations. Additionally, Alphabet experienced negative free cash flow of $9.07 billion, significantly below the anticipated $2.70 billion.
The report highlighted weaker-than-expected search revenue, leading to a nearly 11% drop in shares during premarket trading. Analysts expressed mixed views; while Citizens downgraded Alphabet to market perform, others like Bank of America and BMO maintained buy ratings but adjusted their price targets downward.
Bank of America reduced its target from $430 to $380, suggesting a 17% upside, while BMO lowered its target from $480 to $425, indicating a potential 31% gain. Analysts noted that despite query growth reaching a five-year high, monetization challenges persist, particularly as Alphabet transitions its search monetization strategy towards AI-driven models.
The overall sentiment reflects caution, with several analysts emphasizing the need for improved visibility into Alphabet's AI initiatives and their impact on revenue growth