Google stock falls over 10% after Alphabet misses Q3 revenue estimates: Why analyst sees buying opportunity

Google stock came under pressure after Alphabet missed Wall Street estimates for the third quarter, with its advertising business emerging as a key concern. GOOG shares dropped more than 10% in after-hours trading on Wednesday. Yet CFRA Research analyst Angelo Zino believes the recent decline could offer investors an opportunity over the next 12 months.

Alphabet shares had struggled since the company’s July earnings report and faced further pressure in after-hours trading following the latest results. Microsoft, meanwhile, beat Wall Street expectations on both revenue and earnings.

During an interview with Yahoo Finance, Zino said the pullback was not surprising given concerns about profit margins and tougher comparisons for Alphabet’s advertising business. However, he said the company’s long-term business story remained intact.

Google Stock Drops After Alphabet Earnings Miss

Alphabet reported revenue of $127.6 billion for the quarter, below analysts’ estimate of $128.2 billion. Its core advertising business was a major source of the shortfall, generating $82.01 billion in revenue, about $1.41 billion below expectations.

Net income available to common shareholders fell 25% to $26.17 billion, while adjusted earnings per share came in at $2.67, missing Wall Street’s target of $3.02, as per Reuters report.

The company also reported negative free cash flow of $9.07 billion, compared with analysts’ expectations that it would come close to breaking even. Spending on cloud capacity and AI research contributed to the cash outflow.

GOOGL Stock Outlook Hinges on Advertising and Cloud

The search advertising business was a key source of disappointment in Alphabet’s latest earnings, making management’s outlook particularly important for investors.

Zino said analysts would be looking for comments on the direction of advertising revenue over the coming quarters. Tougher comparisons are expected to remain a challenge into the fourth quarter and the first quarter of the following year.

Google Cloud is another area to watch. Zino said investors would want to understand where the division’s momentum would come from and how much growth would be driven by Gemini, Alphabet’s artificial intelligence offering.

He also flagged hardware as a potential pressure point because the business carries lower margins.

Is GOOG Stock a Buying Opportunity

Zino believes the recent pullback in GOOG and GOOGL shares could provide an attractive entry point for investors with a 12-month investment horizon.

His view comes despite the near-term challenges facing Alphabet, including advertising comparisons and potential pressure on margins. The company’s cloud performance and management’s comments on search will also be important in assessing its outlook.