Buy the Spike in Alphabet Stock After Its First $100 Billion Quarter?

Core Insights - Alphabet achieved its first $100 billion quarter in Q3, driven by AI innovations that boosted advertising growth in Search and YouTube, alongside cloud services expansion [1][4] - The stock surged by approximately 50% year-to-date, challenging Nvidia for the top gains among the Mag 7 [2] - Alphabet's custom AI chip, the Tensor Processing Unit (TPU), was crucial in powering its AI infrastructure and attracting enterprise deals [3][4] Financial Performance - Alphabet's consolidated revenue increased by 16% year-over-year to $102.3 billion, with all business segments showing double-digit growth [4] - Google Cloud experienced a 34% growth rate in Q3, slightly surpassing Microsoft's Azure, positioning Alphabet as the third-largest cloud provider [5] - Excluding traffic acquisition costs, Q3 sales rose 17% to $84.47 billion, exceeding estimates by 3%, while EPS soared 35% year-over-year to $2.87, beating expectations by 27% [6] Future Outlook - Although specific revenue targets for Q4 were not provided, Alphabet's tone suggested expectations of sustained double-digit growth [7] - CEO Sundar Pichai indicated that the company is realizing significant business value from AI and anticipates continued momentum into Q4 and beyond [8] - Alphabet raised its capital expenditure forecast for the year to over $90 billion to support long-term growth [8] Strategic Developments - Alphabet signed a record-breaking multi-billion-dollar deal with Anthropic to supply up to 1 million TPUs, highlighting its commitment to AI [10] - Among the Mag 7, Alphabet has the second cheapest forward earnings multiple at 27X, with a reasonable price-to-forward sales ratio of 8X [11] Analyst Sentiment - Following the strong Q3 results, several firms, including Goldman Sachs and JPMorgan, raised their price targets for Alphabet, with some reaching as high as $350 [12]