Alphabet (GOOGL.US) shares slump after earnings, but analysts remain bullish: AI and cloud businesses are long-term strengths.

Thursday pre-market, Alphabet Inc. Class C parent Alphabet (GOOG.US, GOOGL.US) shares plunged 11% to $289. Investors focused on the company's spending, free cash flow data, and slowing search business revenue, partly attributed to lower customer monetization rates under the AI model. Alphabet still expects full-year total capital expenditures in the range of $195 billion to $205 billion, but again warned that capital expenditures will increase significantly in 2027. Below are analysts' views on Alphabet's third-quarter results: Morgan Stanley analyst Brian Nowak has an "Overweight" rating on Alphabet with a $375 price target. He said: "Alphabet is not expensive; based on after-hours trading prices, its P/E ratio is only 16 times our forecast 2028 earnings per share... If third-party TPU sales scale is taken into account, the valuation could be even lower. But we believe its valuation multiple will depend on search business innovation, scaling of next-generation agentic products, and the ability to continue driving revenue growth during the transition. This is because third-party TPU sales will dilute the overall valuation multiple. Alphabet released its latest Gemini agent to enterprise users on October 8 and plans to bring the same Gemini agent experience to consumers later this year, starting with the 1 billion users of the Gemini app." Bank of America Corp analyst Justin Post has a "Buy" rating on Alphabet with a $380 price target. He said: "We acknowledge the near-term risks facing the search business, but Alphabet Inc. Class C's strong performance in AI traffic, excellent execution in past technology transitions, and competitive advertising platform delivery growth give us confidence in navigating this cycle. Alphabet Inc. Class C's new-generation Carbon LLM leads in intelligence, and external demand for its TPU infrastructure is also growing. We believe Alphabet Inc. Class C's position in cloud and agentic AI is strengthening... In addition, early initiatives such as Waymo and quantum computing provide meaningful long-term optionality that is not yet reflected in valuation." JPMorgan analyst Doug Anmuth has an "Overweight" rating on Alphabet with a $375 price target. He said: "Alphabet's third-quarter results and sharp stock decline show that when a hyperscaler spends hundreds of billions of dollars building AI infrastructure, causing free cash flow to turn negative, while core business results disappoint, its margin for error is very limited... We maintain our 'Overweight' rating because we believe the challenges facing Alphabet Inc. Class C's search business are surmountable rather than permanent structural issues; and Alphabet Inc. Class C cloud will become an even more critical part of the company's business, expected to drive about 30% of Alphabet's overall revenue growth in 2027 and 2028." Susquehanna analyst Shyam Patil gives Alphabet a "Positive" rating with a $400 price target. He said: "Alphabet's results were mixed, with strong cloud but advertising slightly below expectations. We remain bullish on its long-term prospects for three reasons: 1) long-term growth momentum in the advertising business; 2) rapid expansion of the cloud computing business; 3) continued momentum in AI." Seeking Alpha analyst Kenio Fontes has a "Buy" rating on Alphabet. He said: "I don't like this quarter's performance. In fact, I even agree with the market, because I think a valuation cut is somewhat justified in this situation. But on the other hand, as a long-term investor, I remain bullish on Alphabet; this decline has instead increased the margin of safety... This is a company with a strong track record in capital allocation, a wide moat, triple-digit growth in cloud, multiple positions in AI and semiconductors, and even in a weak quarter, it can generate $51 billion in operating cash flow in a single quarter." Seeking Alpha analyst Jonathan Weber said: "In summary, despite Alphabet's accelerating revenue growth, margin expansion, strong operating profit growth, and so on, its valuation remains quite reasonable. In my view, this makes Alphabet highly attractive right now. The market's reaction to Alphabet's third-quarter report seems overdone, but for investors with courage, this is precisely an opportunity."