By Alphabet stock (NASDAQ: GOOGL) gained more than 1% on Monday as investors returned to the shares following last week’s sharp post-earnings sell-off, which wiped out approximately $505 billion in market capitalisation in a single session.
The recovery comes as investors reassess the company’s third-quarter results and its long-term growth prospects.
Although Alphabet reported an earnings-per-share miss against Wall Street expectations, its rising capital expenditure and negative free cash flow also raised concerns about the financial implications of its artificial intelligence (AI) investments.
However, analysts have continued to highlight growth opportunities across Google Cloud, AI infrastructure and Search, providing support for the stock.
Analysts maintain bullish ratings despite price target cuts
Several Wall Street analysts maintained positive ratings on Alphabet while lowering their price targets following the company’s quarterly results.
Wells Fargo analyst Ken Gawrelski maintained an Overweight rating but reduced his price target to $371 from $417.
He cited the increasing penetration of AI Overviews, which could weigh on paid search clicks through at least the first quarter of 2027.
Gawrelski also lowered his 2027 and 2028 operating income estimates by 3%.
His earnings-per-share estimates for the two years were reduced by 2% and 4%, respectively.
He expects stronger Google Cloud revenue, including sales of its tensor processing units (TPUs), to help offset slower growth in Search.
Cantor Fitzgerald analyst Deepak Mathivanan also maintained a Buy rating while cutting his price target to $350 from $420.
Mathivanan noted that operating profit missed estimates by 7%, while Search growth slowed.
However, he highlighted Google Cloud’s growth of more than 100%, supported by demand for cloud services and TPUs.
He believes Alphabet remains well positioned across AI applications, models and infrastructure.
Google Cloud growth supports AI investment case
Google Cloud has emerged as an important part of Alphabet’s investment narrative as demand for AI computing infrastructure increases.
The division reported revenue of $30.7 billion, representing 103% year-over-year growth.
Its backlog also reached $561 billion, highlighting the scale of demand for its services.
BMO Capital analyst Brian Pitz maintained a Buy rating but lowered his price target to $425 from $480.
Pitz highlighted increasing Search usage driven by AI features and said investors could be underestimating the future profit potential of Google’s TPU business.
He expects the business to provide additional growth opportunities in 2027 and 2028.
Meanwhile, Citi raised its estimates for Alphabet’s AI service revenue through 2028, citing accelerating demand from major cloud providers.
These developments suggest that analysts continue to see opportunities for Alphabet to monetise its AI investments, even as the spending cycle puts pressure on near-term cash flow.
Alphabet’s financing and spending remain in focus
Alphabet’s heavy investment in AI infrastructure remains a key concern for investors, particularly after capital expenditure pushed free cash flow into negative territory in the third quarter.
The company also announced a 6 billion euro bond offering, signalling continued access to capital markets as it finances its spending requirements.
Despite the concerns, analyst sentiment remains broadly positive.
According to TipRanks, Alphabet has a Strong Buy consensus rating based on 28 Buy ratings and four Hold ratings received over the past three months.
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