What Happened?
Shares of online advertising giant Alphabet (NASDAQ: GOOGL) jumped 2.8% in the morning session after the company reported strong second-quarter financial results that beat Wall Street expectations and announced plans to increase its spending on Artificial Intelligence.
The technology giant posted earnings per share of $2.31 and revenue of $96.43 billion, both ahead of analyst forecasts. Key segments like YouTube advertising and Google Cloud also delivered stronger-than-expected results. Alongside the strong performance, Alphabet announced it would boost its capital spending, funds used to acquire or upgrade physical assets, by $10 billion to keep pace in the Artificial Intelligence race. While increased spending can sometimes concern investors, the market viewed the move positively, signaling confidence in the company's long-term AI-driven growth prospects. This sentiment was echoed on Wall Street, where analysts from firms including Citi and JMP Securities raised their price targets for the stock.
After the initial pop the shares cooled down to $193.36, up 1.6% from previous close.
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What Is The Market Telling Us
Alphabet’s shares are not very volatile and have only had 5 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful, although it might not be something that would fundamentally change its perception of the business.
The previous big move we wrote about was 3 days ago when the stock gained 2.6% on the news that several Wall Street analysts boosted their price targets on the company, citing optimism around artificial intelligence and a favorable economic outlook. Morgan Stanley increased its price target on the shares to $205 from $185, pointing to potential revenue acceleration driven by generative AI. Similarly, Bank of America analyst Justin Post lifted his price target to $210 from $200, anticipating steady growth in Google's Search ad spending. Rothschild & Co also raised its target to $215. This wave of positive sentiment came as investors eagerly awaited Alphabet's second-quarter earnings report. Notably, the earnings season got off to a strong start: More than 85% of the S&P 500 stocks that reported earnings exceeded expectations, according to FactSet data. This robust performance fueled positive sentiment, suggesting that corporate profitability remained resilient despite ongoing economic uncertainties.
Alphabet is up 2.1% since the beginning of the year, and at $193.36 per share, it is trading close to its 52-week high of $206.38 from February 2025. Investors who bought $1,000 worth of Alphabet’s shares 5 years ago would now be looking at an investment worth $2,564.
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