Shares of Google parent Alphabet (GOOGL; GOOG) tumbled more than 9% in intraday trading Wednesday after the tech giant's cloud revenue fell short of expectations in the third quarter, despite 澳洲幸运5官方开奖结果体彩网:a better-than-expected quarter overall. However, analysts say that Alphabet's cloud results shouldn't worry investors too much.

Why Analysts Say Investors Shouldn't Fret

Industry analysts say investors shouldn't fret about Google's weaker-than-expected cloud performance. Wedbush Securities' Dan Ives said on X that the negative reaction in shares is "overdone" and that investors are placing "too much relative value" on cloud, which accounts for only about 11% of Alphabet's revenue.

Google's cloud revenue totaled $8.41 billion, which was roughly 2% below expectations of $8.6 billion even though it grew 22% from $6.87 billion in the same quarter last year.

In the company's earnings call Tuesday, Alphabet CEO Sundar Pichai attributed the smaller-than-expected gains to customers choosing to optimize their spending, possibly due to economic uncertainty. Analysts at Mizuho Americas said they expect the softness in cloud revenue to be "transitory" based on what they've seen at rival Amazon's (AMZN) cloud business.

In an X post, Ives said owning Google stock solely for its cloud business "is like rooting for Michael Jordan to play baseball."

Wedbush maintained its "outperform" rating on Alphabet shares, eyeing a price target of $160 per share. GOOGL on Wednesday traded at roughly $126 per share, with shares up just over 40% since the start of 2023.

Analysts at Jefferies were also optimistic, and said higher revenue growth from Google𓆉 Search and YouTube more than offset a slowdown in the cloud segment. They attributed part of the slowdown to challenges in ramping up AI infrastructure, but said the headwinds could fade as early as next year.

In a research note, Bank of America analysts said it was a "tough night" to miss on cloud projections. However, they added that the company could benefit from AI investments in the long run, especially integration of AI-tools with advertisements—something they feel Google is best positioned for.

"AI is helping advertisers find as many people as possible in their ideal audience for the lowest possible price. Early tests are delivering 54% more reach at 42% lower cost," said Google's chief business officer, Philipp Schindler.

Tech Giants Compete for Cloud and AI Influence

Alphabet's cloud results could be garnering more focus because they're in sharp contrast to 澳洲幸运5官方开奖结果体彩网:bumper cloud results from Microsofꦺt, which reported on the same day.

With an 11% share of the global cloud computing market in the second quarter, Google ranked third among tech giants, according to latest analysis available from Synergy Research Group, trailing Amazon and Microsoft (MSFT) at 32% and 22%, respectively.

And cloud is not the only segment where Alphabet is facing a stiff competition from Microsoft. The latter's first mover edge with artificial intelligence projects, which can also impact a company's cloud platform, has left the Google-parent to play catch up.

Microsoft delved into generative AI as early as January, when it invested $10 billion in ChatGPT maker OpenAI, deepening a partnership that stretches back to 2019. It has also rolled out the integration of 澳洲幸运5官方开奖结果体彩网:AI-tools with its Bing search engine and a 澳洲幸运5官方开奖结果体彩网:subscription service for its suite of products.

Google's generative AI suite now includes products like Bard, a chat-based AI tool released in March, and Studio Bot, an AI-powered coding assistant introduced in May. 澳洲幸运5官方开奖结果体彩网:Bard's debut left a lot to be desired, though Google has launched multiple applications of its AI tools since then.