Alphabet shares rise as strong Search, cloud revenue ease investor concerns

Alphabet Inc (NASDAQ:GOOG) shares climbed about 2.4% on Friday morning, extending gains from a post-earnings rally, as investors cheered stronger-than-expected results that highlighted the resilience of its core Google Search business and ongoing momentum in cloud services.

Analysts noted broad-based strength across advertising verticals, while YouTube ad revenue rose 10.3%, roughly in line with estimates.

"Search and ad revenue are still the stars of the show," XTB research director Kathleen Brooks said, adding that Google’s earnings helped lift its stock nearly 4% in after-hours trading on Thursday.

Wedbush analysts hailed the company’s operating income of $30.6 billion, with a 33.9% margin, also beat expectations, signaling continued operating leverage. Alphabet’s margin expanded by about 230 basis points year over year, they noted.

Crucially, Alphabet maintained its $75 billion capital expenditure guidance for the year, signaling strong underlying demand, particularly in its cloud and AI infrastructure. Google Cloud revenue grew 28.1% year over year to $12.3 billion, in line with expectations. The unit now contributes nearly 14% of total revenue, up from 12.4% in the previous quarter.

Management also highlighted growing adoption of AI products. The company said AI Overviews, a feature embedded in Google Search, now reaches 1.5 billion monthly users, which UBS said could help ease concerns over potential disruption from generative AI.

Headwinds

Still, the outlook is not without headwinds. UBS flagged deteriorating consumer sentiment in April, and both UBS and Wedbush cited Alphabet’s caution over a pullback in ad spending from Asia-Pacific retailers due to changes in US de minimis import rules. The company also noted tougher year-ago comparisons in financial services advertising.

Despite these challenges, analysts viewed Alphabet’s cost management as encouraging. UBS said the company is focused on offsetting higher depreciation and amortization costs, linked to aggressive capex, by driving personnel efficiencies. The firm raised its 2026 and 2027 earnings estimates by roughly 7%, lifting its price target to $186 from $173 while maintaining a Neutral rating.

Wedbush, while remaining cautious on the broader digital ad landscape, said it is “incrementally constructive” on Alphabet, citing steady demand trends and better-than-expected execution.

Alphabet’s shareholder returns also contributed to positive sentiment. The company announced a 5% increase in its dividend and a new $70 billion share buyback program, helping to mitigate concerns about rising costs. Free cash flow grew by more than $7 billion in the quarter.

“Overall, there is not much to dislike in this report,” said Brooks. “But we do not expect it to give renewed hope about the future of the AI revolution. Instead, the market is likely to differentiate between Big Tech based on their individual earnings reports. For now, the market likes what it is hearing from Google.”