Prediction: Alphabet Will Soar After Oct. 28
Key PointsAlphabet has some factors that will boost its growth rate this quarter.
Alphabet investors eagerly anticipate the company's third-quarter earnings report, with the potential for the stock to soar following the announcement. The AI arms race presents Alphabet as a particularly well-positioned company, and with its stock trading 10% below its all-time high, it could be an opportune moment to invest. Alphabet's main revenue source, advertising on its Google platform, has benefited from AI integration, and Google Search revenue grew 17% year-over-year.
However, Google Cloud, Alphabet's cloud computing division, may take center stage. Google Cloud's revenue surged 82% year-over-year in Q2, with a remarkable operating margin of 36%. As Alphabet anticipates spending $200 billion on capital expenditures by 2026, the expectation is that Google Cloud will achieve triple-digit growth, which could justify the significant investment.
The development of a leading AI computing chip, the tensor processing unit (TPU), has also opened up a new revenue stream. TPU sales are expected to increase through the end of 2026, with most of the revenue coming in 2027. Analysts estimate Alphabet's growth rate at 25%, which is impressive for a big tech company. The stock's valuation appears reasonable, as its price-to-earnings ratio (P/E) of 28 is comparable to its peers at a $4 trillion market cap.
If Alphabet reports strong results in its upcoming earnings report on October 28, it could significantly boost the stock price and potentially reach a new all-time high.
Written by urgent.news from Motley Fool's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
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