Needham upgraded its outlook for Alphabet Inc., increasing its price target to $400.00 from $330.00 while reiterating a Buy rating after the company released fourth-quarter financial results.
Alphabet reported revenue of $113.8 billion for the fourth quarter, an 18% increase versus the prior year and 4% above Needham's estimate. The company's operating income for the period was $35.9 billion, up 16% year-over-year, though that figure was 1% below the analyst's projection. Diluted earnings per share were $2.82, a 31% rise from the prior year and 10% ahead of Needham's estimate.
Search remained the largest single revenue contributor, with search revenue rising 17% year-over-year to $63.1 billion in the quarter. Alphabet's Cloud unit continued to accelerate, delivering 48% year-over-year revenue growth to $17.7 billion and generating a 41.9% operating income margin, an improvement of 290 basis points versus the comparable prior-year period. YouTube advertising revenue expanded by 9% year-over-year to $11.4 billion for the quarter.
Needham said the quarter's revenue and profit strength prompted it to increase its internal estimates and raise its stock price target to $400. Other financial firms followed with similar upward revisions. Canaccord Genuity moved its target to $415, highlighting the fourth-quarter performance and noting advancements in artificial intelligence alongside Cloud strength. RBC Capital raised its target to $400, citing Search and Cloud revenue that exceeded expectations by over $12 billion on an annualized basis. Roth/MKM set a new target of $395, pointing to accelerated revenue across Search, Cloud, and Subscriptions. Mizuho raised its target to $410 and specifically pointed to the 48% year-over-year Cloud revenue increase. Truist Securities adjusted its target to $385, referencing the strong quarter and growth in Search and Cloud segments.
Together, these analyst moves reflect a broad reassessment of Alphabet's near-term growth trajectory following the quarter, with multiple firms increasing both earnings and price assumptions. The revisions underscore investor focus on the company's advertising businesses - Search and YouTube - as well as its Cloud division, which delivered particularly high revenue growth and improved margins in the quarter.
Contextual note: The quarter's results show a mix of metrics: revenue and EPS beat expectations, while operating income came in fractionally below one analyst estimate. Analysts cited AI-related developments and Cloud strength as drivers for upgrading targets.