Alphabet stock closed April up 33.8%, its strongest monthly performance since October 2004. The move was fueled by a combination of broader market strength and a blowout Q1 earnings report released on April 29.
On April 30, the stock jumped 10% in a single session following the results.
Q1 revenue came in at $109.9 billion, up 22% year over year. Google Services revenue rose 16% to $89.6 billion. Google Cloud was the standout, posting 63% growth to $20.0 billion.
EPS hit $5.11, against a Wall Street estimate of $2.63. A large portion of that came from $36.9 billion in unrealized gains on private equity investments — primarily Anthropic and SpaceX. Operating income, a cleaner measure of performance, rose 30% to $39.7 billion.
CEO Sundar Pichai flagged one number that stopped analysts in their tracks. Google Cloud’s backlog nearly doubled quarter over quarter to over $460 billion — from $243 billion the prior quarter.
J.P. Morgan analyst Doug Anmuth called it “the single-most impressive metric this earnings season thus far.” More than half of the backlog is expected to convert to revenue within two years.
Cloud makes up 99% of that backlog total.
Search also held up well. Revenue from that segment grew 19% year over year in Q1, the fourth straight quarter of accelerating growth.
Following the report, over 40 analysts raised their price targets. Of 74 firms tracked by FactSet, 86% now rate GOOGL a Buy. J.P. Morgan reiterated an Overweight rating and lifted its target to $460 from $395.
Pichai also revealed a new revenue stream on the earnings call. Alphabet will begin selling its Tensor Processing Units (TPUs) directly to a select group of customers for use in their own data centers.
Until now, TPUs were only available to rent via Google Cloud. The move puts Alphabet in more direct competition with Nvidia in the data center AI chip market.
In April, Alphabet introduced its eighth-generation TPUs — one optimized for AI training (TPU 8t), another for AI inference (TPU 8i).
D.A. Davidson analyst Gil Luria noted that hardware sales have already driven a large share of the cloud backlog. He did flag open questions around the cost structure and mechanics of these TPU deals.
Luria was one of few dissenters post-earnings, reiterating a Neutral rating while raising his target to $375 from $310. He said the outperformance is “well reflected in the current valuation.”
Alphabet stock has gained 23% year to date and 135% over the past 12 months. It is now within striking distance of Nvidia’s market cap.
J.P. Morgan’s Anmuth wrote: “GOOG/L remains our top overall pick, and we believe shares will continue to go higher on both earnings revisions & multiple expansion.”
As of Monday, GOOGL was trading around $382.20.
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