Alphabet Inc. (GOOGL) has been reiterated as a "Buy" by BofA Global Research, with a price objective of $225, following a strong Q4 performance driven by robust Search and YouTube revenues. The report highlights a 13% y/y growth in Search revenues and a 14% y/y increase in YouTube, both surpassing Street expectations. However, the Cloud segment underperformed, with growth decelerating to 30% y/y, below the anticipated 32%, due to capacity constraints and increased competition.
The report underscores Alphabet's strategic focus on expanding AI capabilities and infrastructure, with a projected Capex of $75 billion for FY25, aimed at meeting the rising demand for AI-driven services. Despite the Cloud miss, BofA remains optimistic about the long-term benefits of AI for Alphabet's advertising and Cloud businesses, stating, "We are encouraged to see another quarter of strong Search growth and think Street could be underestimating AI Overview benefits for Search monetization in 2025."
Alphabet's 2025 EPS estimate has been slightly increased to $8.85, reflecting higher revenue growth in Search, offset by lower Cloud growth and increased expenses. The company is trading at $192.39, down 6.78% from the previous close.