Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) shares tumbled about 12% Thursday after third-quarter results paired a record cloud quarter with softer search growth and a steep earnings miss. Five of the six firms listed below trimmed price targets, though most kept bullish ratings.
- Cantor Fitzgerald analyst Deepak Mathivanan reiterated an Overweight rating and lowered his price target to $350 from $420, now based on 25 times fiscal 2027 earnings versus 28 times previously.
- DA Davidson’s Gil Luria kept a Neutral rating and cut his target to $300 from $350, based on 21 times his updated fiscal 2027 estimate.
- Rosenblatt’s Scott Devitt maintained a Buy rating and reduced his price target to $380 from $410.
- Scotiabank analyst Nat Schindler held a Sector Outperform rating on Alphabet’s Class C shares (NASDAQ:GOOG) and lowered his target to $375 from $450, applying 24 times 2027 GAAP earnings instead of 30 times.
- KeyBanc analyst Justin Patterson kept an Overweight rating and trimmed his target to $385 from $410, equal to 23.3 times 2028 earnings.
- Needham’s Laura Martin reiterated a Buy rating and $450 target while raising her 2027 and 2028 estimates.
Revenue rose 25% year over year to $127.6 billion, roughly in line with the $127.9 billion consensus. Google Cloud revenue climbed 103% to $30.7 billion, and backlog grew $47 billion sequentially to $561 billion.
Search and other revenue increased 12% to $63.35 billion, below Street forecasts. Earnings of $2.12 per share missed the roughly $2.94 consensus, dragged down by higher AI spending and an unrealized loss on equity securities.
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Cantor Fitzgerald
Search grew 13% excluding currency effects, missing buy-side whispers by about 1% to 2%, he wrote.
Mathivanan pointed to product momentum instead. Alphabet now uses its Gemini 4 Argon model internally to ship 35% more code with 30% fewer errors. Multi-year purchase commitments for infrastructure, inventory, leases and energy jumped $113 billion in the quarter to $924 billion.
“The underlying pace of innovation across the entire AI stack keeps us bullish,” Mathivanan wrote, adding Cantor would be buyers on the weakness.
D.A. Davidson
“Alphabet reported a rare top and bottom line miss,” Luria wrote.
The revenue shortfall marked Alphabet’s first top-line miss since the fourth quarter of 2024. Gross margin slid 190 basis points sequentially to 59.7% as hardware costs tied to TPU system sales and third-party bridging capacity piled up.
Luria flagged the capex ramp expected through 2027, plus additional funding needs, as a near-term overhang.
Rosenblatt Securities
Devitt’s note framed the quarter as a shift in Alphabet’s center of gravity away from advertising.
“Importantly, by 2028, we expect Cloud revenues to surpass Search and YouTube combined,” Devitt wrote.
He now models $199 billion in capex for 2026, rising to $350 billion next year. Alphabet-level losses, including shared AI research and development, reached $7.7 billion, up 71% year over year.
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Scotiabank
Schindler highlighted search query growth hitting a five-year high, yet AI Mode still monetizes below traditional search.
“The debate is now whether incremental AI queries are economically additive. Based on 3Q, the answer is ‘not yet,’” Schindler wrote.
Free cash flow burn deepened to negative $9.1 billion from negative $5.9 billion in the prior quarter. Schindler contrasted the figure with $19 billion in third-quarter free cash flow at Microsoft Corp. (NASDAQ:MSFT).
KeyBanc Capital Markets
Patterson warned of a search “air pocket” over the next one to two quarters as investors weigh whether the slowdown is transitory or structural.
“We’re in the transitory camp,” Patterson wrote.
He sees 17 to 18 times 2027 earnings as a near-term floor for the multiple. Alphabet now handles more than 50 billion visual searches each month, which KeyBanc views as consistent with AI expanding the search market. An unrealized loss on the stake in SpaceX (NASDAQ:SPCX), amplified the EPS miss.
Needham
Martin argued selling TPU systems externally forces each Alphabet unit to compete for scarce compute, which she says maximizes returns on capex.
Her least favorite number from the quarter was headcount. Full-time employees reached 204,757, up 7.7% year over year, the fastest growth rate in three years.
“We believe that companies should be using AI to replace employees (FTEs),” Martin wrote.
GOOGL Stock Price Activity: Alphabet stock was down 12.49% at $284.30 at the time of publication Thursday, according to Benzinga Pro market data.
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