GOOGL earns price target raise at Roth

Roth Capital Markets analyst Rohit Kulkarni maintained a “Buy” rating and raised his 12-month target to US$265.00 (from US210.00) for Alphabet (Alphabet Stock Quote, Chart, News, Analysts, Financials NASDAQ:GOOGL) in an Oct. 16 earnings preview, saying the company’s cloud momentum and AI investments continue to support a constructive long-term outlook despite near-term headline risks.

Kulkarni noted that Alphabet will report third-quarter earnings on Oct. 29 after market close.

“We are raising our Google Cloud growth assumptions following the recent US$10-billion contract with Meta and the company’s strong AI cloud product announcements, including its quadrillion-tokens milestone,” he said. “At US$250 per share, GOOGL trades at roughly 23× 2026E P/E, putting it in ‘no man’s land ’; a balanced risk/reward setup through year-end.”

He added that while Meta and Amazon remain his top two mega-cap picks, Alphabet is his third heading into 2026.

Kulkarni said he has raised third- and fourth-quarter revenue forecasts mainly due to stronger expected contributions from Google Cloud Platform, though he has trimmed EPS estimates to reflect the €2.95-billion fine imposed by the European Commission for “self-preferencing” practices in Google’s ad-tech operations.

“We’re modelling a one-time fine payment accrual related to the EC ruling, which impacts near-term profitability,” he said. “However, the underlying cloud and AI-driven growth story remains intact.”

On the outlook for Search, Kulkarni acknowledged potential volatility.

“OpenAI’s recent product and partnership announcements may pave the way for an ads rollout in 2026,” he said. “If Amazon’s one-month pause of Google ads is any indication, Search may have a bumpy road ahead.”

Still, he noted that AI Overviews are being monetized at roughly the same rate as traditional results, supported by higher cost-per-clicks despite fewer overall queries.

Kulkarni said Google Cloud continues to gain share in the AI infrastructure market, with enterprise adoption accelerating.

“The six-year, US$10-billion cloud deal with Meta underscores the strategic importance of GCP,” he said. “Building on top of Gemini provides enterprise customers with flexibility and performance advantages in both training and inference workloads.”

He added that regulatory headwinds appear to be easing.

“Following Judge Mehta’s mild remedies in the U.S. Search trial and limited traction in the ad-tech remedies phase, we believe the probability of a Google Ads or AdX divestiture has decreased,” he said. “That said, the EC fine reflects ongoing scrutiny of Google’s competitive practices.”

Looking ahead, Kulkarni expects management to signal higher capital expenditures.

“Consensus continues to underestimate CapEx intensity,” he said. “Google raised its 2025 CapEx guide from US$74-billion to US$85-billion in the second quarter, and we expect that trend to continue as AI workloads scale and supply visibility improves into 2026 and 2027.”

“While near-term volatility around regulation and AI competition persists, Alphabet’s infrastructure scale, accelerating cloud share, and monetization efficiency keep it well positioned to benefit from AI adoption,” he said. “We raise our price target to US$265 and maintain our Buy rating.”

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