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Alphabet’s Earnings Slashed by Cloud Investment, Despite Profits

Alphabet Inc. (NASDAQ: GOOG) reported its Q3 2023 earnings with impressive results, but shares fell nearly 10% due to one blemish in the report: Google Cloud Platform (GCP). While GCP revenues grew 22% YoY to $8.4 billion, the growth rate decelerated from the previous quarter’s 28% YoY growth. This deceleration in the cloud business disappointed investors, causing the stock to drop. However, the rest of Alphabet’s businesses had strong results, with revenues growing 11% to $76.69 billion, beating consensus estimates.

Google Search and Other revenues grew 11.4% to $44 billion, while Other Revenues, which include YouTube Premium subscriptions, grew by 23% YoY. Advertising revenues also rebounded, with YouTube Ads revenues growing 11.3% to $7.9 billion. YouTube Shorts, the short-form video feature, saw an increase in daily views to 70 billion. Despite these positive trends, Alphabet’s overall earnings were affected by the deceleration in the cloud business.

Alphabet’s GAAP EPS was $1.55, beating analyst estimates by 9 cents or 6%. The lower tax rate of 7% versus 16% expectations contributed to the higher EPS. The company’s cloud business, although experiencing a deceleration, is still seeing strong interest in AI, with Google Vertex, its unified AI platform, reporting a significant increase in projects.

Google is also working on a suite of large language models called Gemini, which is designed to be more powerful and versatile than existing models. It will be used across all Google products and services and will be available to developers and cloud customers through Vertex. The company is collaborating with the Google DeepMind team to build the foundation for the next generation of models, set to launch in 2024.

Overall, despite the setback in the cloud business, Alphabet’s earnings show promising growth in other areas, including advertising and AI. While the stock took a hit in the market, the company’s long-term prospects remain strong.

Weekly Cup and Handle Pattern

In technical analysis, Alphabet’s stock chart shows a cup and handle pattern. The stock formed a cup-shaped pattern from March 2022 to July 2023, with a breakout in July 2023. The stock then retraced and formed a handle on the breakout level. The relative strength index (RSI) is attempting to bounce off the 50-band, indicating a potential upward movement in the stock.

Before considering Alphabet as an investment, it may be worth looking at the top-rated stocks recommended by Wall Street analysts. While Alphabet currently has a “Moderate Buy” rating among analysts, there are other stocks that analysts believe are better buys.

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