Alphabet shares climbed 2.2% in morning trading to $285.94 as investors returned to the Google parent after last week’s severe post-earnings sell-off erased about $505 billion from its market value in a single session. The rebound suggests that some investors now view the reaction to Alphabet’s third-quarter results as excessive relative to the company’s underlying business momentum.
The company reported earnings per share below Wall Street expectations, while a sharp increase in capital expenditures pushed free cash flow into negative territory. Those figures raised concerns about the cost of Alphabet’s artificial intelligence investment and its potential effect on the company’s search business.
Analyst commentary provided support for the stock on Monday. Wells Fargo analyst Ken Gawrelski maintained an Overweight rating, although he lowered his price target to $371 from $417. The analyst cited the rapid expansion of AI Overviews, which could weigh on paid search clicks through at least the first quarter of 2027. Phillip Securities also kept a Buy rating and a $375 price target.
Citi, meanwhile, raised its estimates for Alphabet’s AI-related service revenue through 2028, pointing to stronger demand from major cloud providers. Alphabet’s announcement of a €6 billion bond offering was also viewed as evidence that the company retains access to capital markets during its heavy investment cycle.
Analysts highlighted Google Cloud’s reported 103% year-over-year revenue growth to $30.7 billion, along with a cloud backlog valued at $561 billion. These figures were cited as signs that Alphabet’s AI spending is beginning to produce measurable returns.
The wider market environment was supportive as well. In morning trading, the S&P 500 was up 0.6%, the Dow Jones Industrial Average had gained 0.95% and the Nasdaq was 0.8% higher following last week’s technology-led decline. Investors were also looking ahead to Apple’s earnings report, the U.S. midterm elections and a monthly jobs report due later in the week.
Alphabet shares have recovered from recent lows near the 52-week low of $270.70. However, uncertainty over AI monetization and the outlook for search revenue remains, which could continue to drive volatility in the stock.
Sources: Investing.com News.