Alphabet stock jumps 4% after posting strong results, boosting AI spend
Alphabet stock jumped 4% Thursday after the company reported third-quarter financial results that beat across the board and increased its capital expenditures for the year.
The Google parent company bumped its spending expectations on artificial intelligence infrastructure to $91-$93 billion from $85 billion the prior quarter, noting continued strong cloud demand.
CEO Sundar Pichai said the company had a $155 billion backlog for Google Cloud at the end of the quarter.
“Looking out to 2026, we expect a significant increase in CapEx,” Chief Financial Officer Anat Ashkenazi told investors on the earnings call Wednesday.
Deutsche Bank said in a note that there was “virtually no hair on the print,” and wrote that the setup coming into the report was not easy, with the stock up 43% since Alphabet issued second-quarter earnings.
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Alphabet reported third-quarter earnings of $3.10 adj. per share on revenue of $102.35 billion in revenue, its first quarter ever with revenue above the $100 billion benchmark.
Analysts polled by LSEG expected earnings of $2.33 per share with revenue of $99.89 billion.
The strong quarter and a boost in capital spending impressed analysts and solidified Alphabet’s position as an AI leader.
“We continue to see multiple fronts where Alphabet has climbed a steep wall of worry in the past 12 months around the AI theme and don’t see any reasons to suspect a pause or step back in terms of its operating proof points to change investor perception,” Goldman Sachs said in a note.
The Goldman Sachs raised its price target to $330 from $288.
Analysts were also watching for signs of how AI is affecting search, an area the company dominates.
Google’s search arm posted $56.56 billion in revenue for the quarter, up 15% over a year ago.
“The AI search transition has been viewed as the greatest risk to Google, but additional signs that AI search is more opportunity than threat will continue to flip the narrative,” JPMorgan analysts wrote in a note.
The analysts raised their price target on the company to $340 from $300.
CNBC’s Jennifer Elias contributed to this story.
Cheng Xin | Getty Images
Okta on Tuesday topped Wall Street’s third-quarter estimates and issued an upbeat outlook, but shares fell as the company did not provide guidance for fiscal 2027.
Shares of the identity management provider fell more than 3% in after-hours trading on Tuesday.
Here’s how the company did versus LSEG estimates:
- Earnings per share: 82 cents adjusted vs. 76 cents expected
- Revenue: $742 million vs. $730 million expected
Compared to previous third-quarter reports, Okta refrained from offering preliminary guidance for the upcoming fiscal year. Finance chief Brett Tighe cited seasonality in the fourth quarter, and said providing guidance would require “some conservatism.”
Okta released a capability that allows businesses to build AI agents and automate tasks during the third quarter.
CEO Todd McKinnon told CNBC that upside from AI agents haven’t been fully baked into results and could exceed Okta’s core total addressable market over the next five years.
“It’s not in the results yet, but we’re investing, and we’re capitalizing on the opportunity like it will be a big part of the future,” he said in a Tuesday interview.
Revenues increased almost 12% from $665 million in the year-ago period. Net income increased 169% to $43 million, or 24 cents per share, from $16 million, or breakeven, a year ago. Subscription revenues grew 11% to $724 million, ahead of a $715 million estimate.
For the current quarter, the cybersecurity company expects revenues between $748 million and $750 million and adjusted earnings of 84 cents to 85 cents per share. Analysts forecast $738 million in revenues and EPS of 84 cents for the fourth quarter.
Returning performance obligations, or the company’s subscription backlog, rose 17% from a year ago to $4.29 billion and surpassed a $4.17 billion estimate from StreetAccount.
This year has been a blockbuster period for cybersecurity companies, with major acquisition deals from the likes of Palo Alto Networks and Google and a raft of new initial public offerings from the sector.
Okta shares have gained about 4% this year.
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