When investors think about Google-parent stock upside alphabet (Google), its cloud computing business has become a larger part of the discussion. With Google’s third-quarter earnings due on October 29, Wall Street analysts expect the cloud business to deliver strong results.
Google shares are up 25% in 2025, after a poor performance in the first half of the year. Google stock reached an all-time high of 256 on September 19, surpassing the $3 trillion valuation barrier.
Technically, Google stock is down a bit and is trading just below its level 21-day exponential average. In an exponential moving average, the most recent price action carries a higher weight.
Cloud computing is gaining momentum
While investor concern about potential disruption to core internet search businesses amid the rise of generative AI remains, Wall Street analysts are eyeing potential catalysts. This is where the cloud computing business comes into play.
In the third quarter, analysts expect 29% growth in cloud revenue to reach $14.65 billion.
Google is Taking advantage of artificial intelligence The company has the prowess in models, chips, agents and data security to grow its cloud computing business, CEO Thomas Kurian said at an industry technology conference in September. Recent clients include OpenAI, a leading AI model builder, and… Meta platforms (dead).
At BMO Capital Markers, analyst Brian Betz said in a report: “We believe Google Cloud Platform remains well-positioned for stock gains, supported by AI product integration and increased AI-native workloads.”
At Evercore ISI, analyst Mark Mahaney said: “Google Cloud’s AI drive and materially improved go-to-market processes have significantly improved Google Cloud’s competitive position.”
Google Cloud vs. Amazon
One view is that Google’s home-grown AI accelerator chips, called TPUs, are becoming a stronger competitor Nvidia (NVDA).
Right now, the cloud business is a smaller part of Google’s stock valuation than… Amazon.com (Amzn) and Amazon Web Services.
While revenue growth could accelerate for Google’s cloud computing business, another issue is profitability. Amazon’s cloud business is a big part of the e-commerce giant’s valuation given its high cloud gross margins. Amazon Web Services is a major profit driver.
In March, the alphabet It has agreed to buy fast-growing cybersecurity company Wiz In a cash deal worth $32 billion. One view is that purchasing Wiz could boost Google’s share of the cloud computing market versus Amazon and… Microsoft (MSFT)
Google Stock: Antitrust Concerns
In early September, Google shares rose when a federal judge ruled so There will be no need to liquidate assets As part of the remedies in an antitrust case related to the tech giant’s online search business.
IBD Methodology: How to Invest in Stocks with Risk Management
Following the search ruling, Google has introduced the new Gemini integration across its Chrome browser to all US desktop users. Chrome now features native Gemini accessibility via a dedicated button, allowing users to analyze information and content without switching windows.
However, the digital advertising antitrust case could end differently. In April, Judge Leonie Brinkema of the US District Court for the Eastern District of Virginia ruled that Google used classic monopoly-building tactics to control online advertising. The Justice Department alleged that Google’s dominance of the digital advertising market harmed advertisers and content creators.
In September, Brinkema held hearings to discuss possible solutions. The government said Google must sell its Google Ad Manager software, which includes the company’s publisher ad server and ad exchange. Ad servers and ad exchanges are located between buyers and sellers. Brinkema is expected to issue a ruling on treatments in early 2026.
Big changes in artificial intelligence research
In search, new competition from ChatGPT, Perplexity, and others from OpenAI has forced Google to overhaul its search results. ChatGPT provides answers to search queries, while Google’s business model is based on providing web links.
Google will begin rolling out its AI Overviews feature in the US in mid-2024, with conversation summaries topping links for many search queries. The long-term question is how Google Search ad revenue growth will be affected by AI Overviews. Google says AI Overviews now has more than 1.5 billion monthly active users.
See the latest updates to IBD watch lists
Many technology companies are focusing on autonomous, goal-driven AI “agents” that complete tasks themselves. Online shopping on behalf of consumers is expected to be one of the big applications.
Google recently announced something new Agent Payments Protocol (AP2), developed in collaboration with 60 industry partners. Furthermore, AP2 is designed to address authorization, authentication, and accountability in agent payments.
Google delivered Second quarter earnings Revenues exceeded consensus estimates, while Internet search advertising and cloud computing revenues were above expectations.
One closely watched financial metric is capital spending amid the AI boom. In July, Google said it expects capital spending to reach $85 billion in 2025, up from previous guidance of $75 billion. With the updated guidance, capital spending is expected to jump 62% in 2025, up from a 43% increase.
From an accounting point of view, high consumption of data center servers is a concern because it reduces profits. Analysts expect further cost cuts to offset the currency appreciation. Google uses artificial intelligence internally for software coding projects, which may limit hiring.
Google Stock: Buy or Sell Now?
also, Relative strength rating Of GOOGL stock is currently only 88 out of 99 best possible, according to IBD inventory check. The best stocks tend to have an RS Rating of 80 or better.
Holds Google stock Accumulation/distribution classification From B-plus. The Institutional Ownership Rating analyzes price and volume changes in a stock over the past 13 weeks of trading. A+ indicates heavy institutional buying; E means heavy selling. Think of C as neutral.
Moreover, GOOGL stock holds IBD Composite Classification Of 98 of the best 99. Inflammatory bowel disease compound classification It is a combination of key fundamental and technical metrics to help investors gauge a stock’s strengths. The best growth stocks have a Composite Rating of 90 or better.
Meanwhile, GOOGL stock is 21 days old Atr From 2.25. the Average true range It is a metric available on IBD’s MarketSurge that measures the distinct range of a stock’s behavior. Stocks that tend to have big jumps or big drops in daily movement, the kind that can trigger sell rules and investors out of the stock, have a high ATR. Stocks that tend to make more incremental moves have lower ATRs.
IBD suggests stocks with ATRs up to 8%.
Also, as of October 13, GOOGL stock needs to form a New base To be executable.
Follow Reinhardt Krauss on X, formerly Twitter, @reinhardtk_tech For updates on artificial intelligence, cybersecurity, and cloud computing.
You may also like:
Do you want to trade options? Try these strategies
Keep an eye on IBD’s “Breakout of the Day” list of companies that have achieved new buy points
IBD Digital: Unlock IBD’s featured stock listings, tools and analysis today
https://www.investors.com/wp-content/uploads/2018/02/stock-google-09-shutter.jpg
Source link