Alphabet (GOOGL) has grown over time from a search engine into a hyperscaler. The company classifies its two revenue streams as Google Cloud and Google Services.
The stock has gained about 8% year to date as of Friday morning, April 24, according to Yahoo Finance. Meanwhile, the SPDR S&P 500 index (SPY) is up close to 4% in the same period.
The company reported its Q4 fiscal year 2025 earnings report on February 4. The reactions were mixed after the company announced a huge capital-expenditure guidance, just like other hyperscalers.
The company will report its Q1 fiscal year 2026 earnings on Wednesday, April 29. Google has made a few significant moves recently to improve its AI and quantum computing strategy.
Key news for Alphabet stock
On March 11, Google completed its acquisition of Wiz, a cloud and AI security platform headquartered in New York. The company said Wiz will join Google Cloud and maintain its brand and commitment to securing customers across all cloud environments.
On March 24, Google unveiled TurboQuant, a new compression algorithm that significantly reduces the memory demands of large AI models while preserving accuracy. The new algorithm addresses the challenge of memory overhead in vector quantization and reduces bottlenecks in key value caches and vector search systems.
Apple plans to open Siri to third-party artificial intelligence assistants beyond ChatGPT, Bloomberg reported. This move would open the door for users to switch to Gemini, which is obviously good news for Google.
The company announced on March 24 that Google Quantum AI is expanding its quantum computing effort to include neutral atom quantum computing, which uses individual atoms as qubits.
To lead this research, Google hired Dr. Adam Kaufman.
Google hopes that using both superconducting qubits and neutral atoms will accelerate its timeline to near-term milestones.
Pawel Czerwinski/Unsplash
The Neutral Atoms program is built on three pillars:
- Quantum Error Correction
- Modeling and Simulation
- Experimental Hardware Development
On April 22 at Google Cloud Next, the company unveiled its eighth generation of custom Tensor Processor Units (TPU). They come in two distinct architectures. One for training and the other one for inference: TPU 8t and TPU 8i.
These two chips are designed to power everything from cutting-edge model training and agent development to massive inference workloads.
“We’ve been able to run our most demanding workloads two to four times faster and at a 30% lower cost with Google Cloud’s 7th generation Ironwood TPUs,” said Josh Woods, CTO at Citadel Securities.
Bank of America raises EPS estimate for Alphabet stock
Bank of America analyst Justin Post and his team updated their Google stock outlook ahead of earnings.
Analysts said they expect Q1 revenue and EPS of $92.0 billion and $2.69, respectively. The Wall Street consensus is $91.7 billion and $2.66, respectively. The team estimates Q2 revenue and EPS of $98.3 billion and $2.80, respectively. Again above the Wall Street consensus at $97.6 billion and $2.76, respectively.
Post said that the closing of the Wiz deal in March could add $300 million to 400 million to Q2 cloud growth. He expects Google to reiterate the 2026 capex outlook in the range of $175 billion to $185 billion. Post noted that he sees upside risk given infrastructure costs, inflation, and the recent Anthropic deal.
The team raised its 2026 EPS estimate for Google stock to $11.45 from $11.38.
In a research note shared with me, Post reiterated a buy rating for Alphabet stock and a price target of $370, based on a 27 multiple of his estimate for core Google GAAP EPS for 2027 plus cash per share.
He wrote: “Alphabet has traded at an average multiple of 22x GAAP [price-to-earnings ratio] over the last ten years, and we think our target multiple is reasonable vs history given expectations for double-digit revenue growth, Cloud margin expansion, and opportunity to capitalize on strong AI assets.”
Downside risks for Alphabet stock:
- Loss of search traffic to AI tools from competitors,
- LLM integration in search may take longer than expected
- Revenue pressure from compliance with the EU Digital Markets Act,
- Potential for increasing Capex and lower FCF, given AI investments.
