Alphabet’s (GOOG, GOOGL) Q4 results late Tuesday showed the company’s efficiency workstreams shining through, even amid higher capital expenditures, but the focus is now on the company’s artificial intelligence projects, Morgan Stanley said in a note to clients on Wednesday.
“Capex is heading higher, but we see a leading GenAI pipeline and incremental cloud and subscription rev opportunities [to further support ads],” the investment firm said, adding that Alphabet is “one of the best-positioned consumer-facing GenAI companies.”
The company’s AI pipeline targeting consumers and advertisers is “flush” and ready to flow, the note said, as Alphabet is launching “multiple emerging GenAI tools for users and advertisers that we see driving more durable multi-year growth.”
Morgan Stanley also noted that the benefits of Alphabet “durably re-engineering its cost base continue to show.”
Alphabet’s “number of efficiency workstreams/projects continues to grow as product/process prioritization, simplified org structures/removing layers, slower headcount growth, infrastructure and process efficiency efforts [including AI use], procurement and real estate adjustments are contributing to a leaner opex base,” the note said.
Morgan Stanley raised Alphabet’s price target to $165 from $150 and kept the overweight rating.
Alphabet’s shares were down more than 6% in recent Wednesday trading.