Alphabet shares fall on mixed results, but Goldman sees 25% rise on AI strength

• Alphabet shares fell Wednesday after the earnings release, as Wall Street analyzed mixed results.

• Goldman Sachs said it remains bullish on Google’s parent company and raised its 12-month price target.

• The bank said it views the search giant as a leading player in AI.

Alphabet shares fell Wednesday as investors digested second-quarter results that beat profit estimates but fell short in other key areas.

The mixed results sent shares down 5% Wednesday afternoon, but Goldman Sachs analysts say they remain optimistic about the company’s opportunities in artificial intelligence.

In the latest quarter, the company reported earnings of $1.89 per share, compared with an estimated $1.85. Still, YouTube’s ad revenue fell short of Wall Street expectations, at $8.66 billion versus an estimated $8.95 billion. Capital expenditures in the quarter were also higher than expected, at $13.2 billion.

Goldman Sachs was upbeat in its analysis, raising its price target for Alphabet to $217 from $211 in a note after the company’s results. That’s a 25% increase from Wednesday afternoon’s price of $172.80.

Goldman says much of his optimism comes from the opportunity presented by Alphabet’s AI.

“While we cannot refute the ongoing investor debate around the future of search, we continue to believe Alphabet is positioning itself as an AI-driven company,” the analysts noted, adding that the company has existing applications into which it can further integrate its AI tools.

Investors on Tuesday’s earnings call, however, seemed concerned about the return on investment from such an investment in AI. Alphabet executives fielded numerous questions about monetizing AI initiatives, including whether Summaries of AI-generated research results And Integrating AI into the Cloud.

Executives did not provide specific numbers and stressed that the tech giant’s AI ambitions will produce long-term returns.

“It’s something that I think will ultimately become a significant driver over time,” Alphabet CEO Sundar Pichai said of integrating AI into its cloud unit.

Pichai also said the company has “over 2 million developers playing with these things.”

Goldman analysts aren’t fazed by the potentially long time frame for AI gains to materialize, but they say they expect investors to continue to focus on the future of research, operating margin results and long-term investments in data centers and technical infrastructure to power AI.

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