What happened

Shares of Google parent Alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) rushed out of the gate Wednesday, rising 6% in the first 10 minutes of trading in response to an earnings beat announced yesterday.

Heading into earnings, analysts had estimated that Alphabet would report $15.90 per share in fourth-quarter profits on $53.1 billion in sales, but the company blew right past both those numbers, with EPS of $22.30 on sales of $56.9 billion.  

Rising red stock arrow representing a stock going up drawn on a yellow background

Image source: Getty Images.

So what

Fourth-quarter sales grew 23% year over year, with services revenue up 22% and cloud revenue growing more than twice as fast at 46%. Earnings as calculated according to generally accepted accounting principles (GAAP) increased 45% year over year.

The quarter marked a significant acceleration from Alphabet's performance earlier in the pandemic, lending hope that this story is getting better, not worse. For the full year, Alphabet's sales increased only 13% versus fiscal 2019, and profits only 19%.  

Now what

The momentum seems likely to extend into 2021, with management noting that retail internet searches by consumers nearly tripled year over year in the fourth quarter, while corporate buyers responded to the revived interest by spending more on digital advertising.

CFO Ruth Porat says the company has "significant ongoing momentum," and Wall Street seems to agree. Already this morning, more than a dozen analysts have raised their price targets on Alphabet stock, according to TheFly.com. Among them: Pivotal Research, which took one look at what it called one of the strongest quarterly upside surprises in recent memory, and entered a Street-high price target of $2,750 a share on the stock that's trading at less than $2,100.

Analysts seem to have no doubt which direction Alphabet stock is going in, and this morning, investors agree.