Alphabet’s Search and Cloud growth shine in Q2 despite YouTube miss: analysts
Published: 13:08 24 Jul 2024 EDT
Bank of America has reaffirmed its ‘Buy’ rating on Alphabet Inc (NASDAQ:GOOG), raising its price target to $206 despite a mixed second-quarter performance.
The tech giant's earnings report for Q2 2024 showed robust growth in Search and Cloud services, with net revenue hitting $71.4 billion, surpassing Wall Street's expectation of $70.7 billion.
Search revenues soared by 14% year-over-year, and Cloud revenue growth accelerated to 29%, with margins improving significantly.
AI benefits are clearly reflected in Alphabet's Search and Cloud revenues, Bank of America noted.
Analysts highlighted that increased AI-driven query volumes and improved model sizes are enhancing search quality while keeping costs stable.
However, the analysts also noted some challenges. YouTube's revenue growth was slower than anticipated, and higher depreciation expenses are expected to weigh on future earnings.
As a result, Bank of America revised its 2025 revenue estimates downward but raised operating income forecasts.
Despite these headwinds, the firm remains optimistic about Alphabet's long-term prospects.
“Strong Q2 search and Cloud results reinforces our thesis that Google is a net Al beneficiary,” the analysts wrote.
Alphabet’s Class A shares were down 4.6% in early afternoon trading Wednesday.
