Alphabet Stock Sank After Earnings. Here’s What Investors May Be Missing

On the Nov. 2, 2026, episode of The Morning Filter podcast, guest host Sarah Hansen and Morningstar Chief US Market Strategist Dave Sekera broke down what sent Alphabet GOOGL stock lower after earnings and why Morningstar raised its fair value estimate despite the selloff. Here is an excerpt from the show.

Why Alphabet Stock Sold Off After Earnings

Sarah Hansen: All right, great. Moving on to Alphabet. This is one of the ones that sold off really, really sharply after earnings; I think more than 12% on the day on Thursday. Tell us what the market was responding to there and what’s Morningstar’s take?

David Sekera: Well, I mean, it’s a big surprise that they missed on both the top line and the bottom line. So, just walking through the numbers here, I mean, the numbers in and of themselves were pretty good. Revenue was up 25%. Their operating margins expanded by 130 basis points to 31.8%. Google Cloud grew over 100%. It now constitutes 24% of the revenue of the company. That’s up from only 15% a year ago. But the problem came in on the search side of their business that came in at only a 12% growth rate that was expected to be a 17% growth rate.

I think that’s what really caused the stock to tank because there’s a lot of concern that AI is now eating away at their search business. You have AI overviews, their AI mode. I mean, those are growing as a percentage of their total search queries overall, and so people are concerned that by using those, they’re not able to monetize that part of the business for advertising. Now, from our point of view, our analyst, he’s really not necessarily that concerned about this in the short term. He’s noted, I mean, one thing that Google knows how to do is to be able to figure out how to monetize its products. It has a long history of doing that. Even if they’re not necessarily generating as much revenue on AI usage now, we do think that they will be able to figure that out going forward.

Just taking a look at some of the other parts of their business, I mean that Google Cloud business is still expected to generate just crazy growth going forward, especially since now they’re starting to sell those TPUs instead of just renting them out. We made a couple of changes to our model and we actually went the other way. While the market sold off as much as it did, our analysts raised our fair value to $450 a share, up from $433.

Overall, we think the market’s underappreciating the rapid growth in Google Cloud, and we still think that among all of the AI companies that they’re in still the better position type of spots. They have good vertical integration. We think that provides a better cost structure than a lot of others, and they have a lot of in-house things going on, like their TPUs, their own AI model; they’re co-designing hardware and software. We think that helps them minimize costs and put them in a better cost position than their competitors.

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