Alphabet (GOOGL) Stock Drops 10% – What's Behind the Decline?

As the stock chart for Alphabet (GOOGL) shows, on 4 February, the share price reached a historic high above $205. However, despite surpassing analysts’ expectations, GOOGL shares dropped sharply after the earnings report was released:

→ Earnings per share: actual = $2.15, forecast = $2.12
→ Gross revenue: actual = $187.8 billion, forecast = $187.3 billion

As a result, GOOGL's current price is approximately 10% below its all-time high. Market sentiment may have turned negative due to several factors:

→ Cloud revenue fell short of expectations, raising concerns about Alphabet’s ability to compete in the rapidly evolving AI sector.

→ Weaker-than-expected advertising revenue from Google, Alphabet’s core business. While advertising revenue grew by 10.6% to $72.46 billion in Q4 2024, analysts had anticipated a 12% increase.

→ Alphabet announced plans to significantly increase capital expenditures next year to around $75 billion, prompting questions about the impact on depreciation and profitability.

Additionally, news that China has launched an antitrust investigation into Alphabet—potentially in response to tariffs imposed on Chinese goods by the Trump administration—may have weighed on the stock price.

Technical Analysis of Alphabet (GOOGL)

GOOGL remains within an upward trend channel (marked in blue on the chart), with the price having pulled back to key support levels, including:

→ The lower boundary of this trend channel
→ The $180.90 level, marking the top of the bullish gap from 10 December
→ The psychological level of $180, which acted as resistance in late 2024 (indicated by arrows)

This suggests that the downward momentum caused by the earnings report could slow down or even reverse, meaning the current price action may be a pullback within the prevailing uptrend.

Should You Buy GOOGL Stock Now?

According to a report from The Smart Investor via Yahoo, investors should not be overly concerned, as:

→ Alphabet's strong cash flow will allow it to fund its planned $75 billion in capital investments without issue.

→ The company’s leadership stated that demand for its AI-driven products currently exceeds supply.

Meanwhile, analysts surveyed by TipRanks believe Alphabet can overcome its challenges:

→ 27 out of 37 analysts recommend buying GOOGL, with none advising to sell.
→ The 12-month average price target for GOOGL is $215.85.

Overall, while short-term volatility remains, long-term prospects for Alphabet appear solid. Investors with a longer time horizon may see this dip as a buying opportunity.

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