Analysts across Wall Street remained largely bullish on Alphabet following its latest earnings beat , but pointed to its high capital expenditures and a miss in YouTube advertising as reasons for the stock’s underperformance Thursday morning. Alphabet beat on both the top and bottom lines in its fourth-quarter earnings report released Wednesday. The Google parent earned $2.82 per share on revenue of $113.83 billion, while analysts polled by LSEG had forecast earnings of $2.63 per share on $111.43 billion in revenue. Other highly watched metrics, including Google Cloud revenue and traffic acquisition costs, also surpassed expectations. But a sore spot on the report was Alphabet’s YouTube advertising, which — at $11.38 billion — came in lower than the estimated $111.43 billion. UBS analyst Stephen Ju chalked up this miss “partially due to some brand issues.” “There were some misses with YouTube ads only growing +9% Y/Y against tougher comps, while [subscriptions, platforms & devices] also came in a touch light at +17% Y/Y growth,” wrote Bernstein analyst Mark Shmulik. But the bigger weakness highlighted in the report was Alphabet’s higher capital expenditures guidance, with the company expecting a sharp increase in artificial intelligence spending this year. The company forecast 2026 capital expenditures, or capex, of between $175 billion to $185 billion. The top end of this forecast is more than double its 2025 spend. On a Wednesday call, Alphabet finance chief Anat Ashkenazi told analysts that this money would go towards investing in AI compute capacity for Google DeepMind and to meet “significant cloud customer demand as well as strategic investments in other bets.” But while analysts acknowledge higher capex as a weak spot for Alphabet, they were also more optimistic about this spend than the stock’s 3% slide on Thursday morning seemed to suggest. “While capex guidance for 2026 was considerably above expectations, we think the resulting infrastructure footprint creates a meaningful moat that few (if any) can replicate, and perhaps just as importantly, one that Alphabet can best monetize via the combination of its broad service offering (both advertising and subscriptions) as well as through the rapidly accelerating Cloud business,” wrote Deutsche Bank analyst Benjamin Black. “Importantly, we believe the doubling of capex Y/Y comes from a position of strength, with Gemini now at 750M MAUs & showing significantly higher engagement per user, Google Cloud revenue accelerating to +48% w/backlog up 55% Q/Q to $240B, & Search revenue accelerating to +17% as AI continues to expand the market,” JPMorgan’s Doug Anmuth added. Bernstein’s Shmulik highlighted the broader software sell-off and general pessimism against tech stocks as a reason behind Alphabet’s slight underperformance. “A week ago this print would have been bought up, but it’s February, and it seems no revenue beat is enough in an investment cycle that is just as likely to be a race to the bottom as it is TAM expansionary while wiping out FCF in the process,” he wrote. Meanwhile, UBS’ Ju also pointed out that bears could argue that tight compute supply, alongisde outpacing demand, could cap Alphabet’s near-term cloud growth. Overall, however, analysts maintained their long-term bullish stances on shares of Alphabet. Here’s how some of Wall Street’s biggest shops reacted. Morgan Stanley: overweight, $330 The bank’s target implies about a 1% downside from Alphabet’s Wednesday closing price of $333.04. “GOOGL’s accelerating multifaceted engagement, monetization and capex investment (for further AI-driven innovation and growth) are the second indicator this earnings season (after META’s impressive guide) that the leading scaled companies with the most data, reach and ability/willingness to invest are seeing the benefits of their flywheels… and that the gap between them and the smaller players across tech space is likely to widen faster than expected even 35 days ago.” Bernstein: market-perform, $345 Bernstein’s forecast, up from $335, offers upside of 4%. “If investors’ chief complaint earlier in the AI LLM/search wars was that Google wasn’t spending enough to keep up, they suddenly find themselves reversing course and wondering if Google is now spending too much with a 2026 CapEx guide of $175-185B nearly 2xing investment levels Y/Y over year. And if there was any lingering doubt that management was being conservative, it certainly sounds like their biggest worry these days is how quickly they can spin up more capacity. With EPS/FCF firmly range-bound in an escalating investment cycle, the hope is that the ROIC holds up in 2027+ where questions around revenue growth durability emerge.” UBS: neutral, $348 UBS’ target corresponds to upside of around 4%. “That said as Google’s CapEx guide was $55B ahead of our projection for 2026, total costs increase ~$16B and ~$24B to result in a more muted impact to EPS (2027E EPS rises by 1%), which may disappoint investors as GOOGL shares are near peak multiple levels. We maintain our Neutral rating on balanced risk reward, particularly as the Street begins to discount ChatGPT’s approaching ramp in ad monetization.” Barclays: overweight, $360 Barclays’ target, up from $315, calls for 8% upside going forward. “GOOGL AI story is cranking on full flex-mode with 48% Cloud growth and a massive jump in backlog. Meanwhile Search accelerated and is driving Services margins up. The AI progress comes at a cost, with Deepmind (corp) costs exploding alongside the capex.” Bank of America: buy, $370 Bank of America’s forecast is 11% above Alphabet’s current valuation. “Quarter strengthen thesis that: 1) Google search activity will accelerate from new AI use cases (not losing queries to OpenAI), 2) AI can structurally drive higher Search monetization, 3) Gemini LLM and TPUs are Cloud competitive advantages, and 4) Cloud capex is high ROI, & more capacity will accelerate Cloud growth … Key catalysts ahead: Consumer agentic launch, Ads in Gemini app launch, Cloud Next Conf. (Apr 22).” Deutsche Bank: buy, $390 Deutsche Bank’s price target, up from $370, represents upside of 17%. “The set-up for Alphabet was not easy, with the stock rallying ~20% since 3Q’s results. Against that backdrop, the company reported virtually no hair on revenue and OI results, with strong growth across all major segments – consolidated revenues grew to $114bn, +18% y/y (+17% FXN), outperforming the street by ~2%.” Citi: buy, $390 Citi hiked its price target from $350. “That said, with 2026E CapEx guidance of $175B – $185B materially higher than Street expectations significantly impacting FCF, we acknowledge the concern around investments and ROI. But given clear AI demand signals, we believe Google should be investing in product and in alleviating capacity challenges.” JPMorgan: overweight, $395 The firm’s forecast, up from $385, implies Alphabet stock could rise 19% from here. “While some might say the financial profile and outsized spending shifts Google closer to Meta, we believe we are seeing clear returns on Google’s investments across Gemini, Cloud, and Search, and Google differentiates with very meaningful multi-year backlog.” Goldman Sachs: buy, $400 Goldman Sachs’ target, raised from $375, equates to 20% upside. “Alphabet has climbed a steep wall of worry in the past 12 months around the AI theme and we don’t see any reasons to suspect a pause or step back in terms of its operating proof points that would change investor perception over the near term. We continue to expect Alphabet can successfully navigate the current multi-year evolution of its core Search product by leveraging its current strengths (existing user base; leading product innovation, which is accelerating in pace; technical infrastructure footprint and cost leverage vs. competitors; etc.).”
