Alphabet faces price target cuts as higher AI spending weighs on shares

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Alphabet faces price target cuts

Highlights

Alphabet raises annual capital expenditures guidance to $195 billion–$205 billion, prompting several firms to cut price targets despite revenue beat and 80% cloud growth.
JPMorgan, Cantor, Piper Sandler and others trim price targets to $395–$420, citing near-term margin pressure and long-term uncertainty over AI spending returns.
Major firms including Citi, Roth, and Jefferies maintain buy ratings with targets up to $447, citing strength in AI-driven Search, Cloud, and advertising monetization.

Raised capital spending outlook reshapes analyst views

As reported by CNBC, Wall Street analysts are reacting unevenly to Alphabet's latest quarterly results after the Google parent said it now expects annual capital expenditures of $195 billion to $205 billion, up from its previous $180 billion to $190 billion forecast.

The company still delivers a revenue beat, helped by cloud revenue growth of more than 80% from a year earlier, but the larger spending plan is prompting several firms to lower their price targets. Alphabet is also continuing its broader AI push through Gemini integration in search, Gemini Spark and Google AI Studio, while investors weigh whether those investments will generate sufficient returns.

Roth analyst Rohit Kulkarni says rising capital requirements are a growing concern over the long term, but he still views the higher spending as necessary to capture an expanding AI market. Roth keeps a buy rating and a $440 price target, arguing investors should buy the stock on weakness as revenue estimates continue to rise.

Cloud growth and AI returns support longer-term case

Several major firms maintain constructive ratings on Alphabet despite trimming targets or highlighting near-term pressure from spending. Citizens keeps an outperform rating with a $515 target, saying the key issue is not the absolute level of AI capital spending but whether returns justify continued investment, and arguing AI infrastructure economics remain attractive enough to support elevated industry spending.

JPMorgan lowers its target to $420 from $460 but says it would buy shares on the pullback, citing monetization across Cloud, Search and subscriptions. Evercore ISI also sets a $420 target and says its core long thesis remains intact despite higher capex guidance and a larger projected 2027 free cash flow hit.

Cantor cuts its target to $420 from $435 and says the second quarter remains strong, while Citi keeps a buy rating and a $447 target, pointing to AI-driven gains in Search and Cloud. Piper Sandler lowers its target to $395 from $445 and says Alphabet needs a leading frontier model to justify its valuation, while Jefferies keeps a buy rating and a $445 target, citing search advertising resilience, YouTube's video opportunity and Google Cloud's potential as the next major driver for the shares.

In our earlier coverage of Alphabet’s Q2 results and the start of tech earnings season, we noted that investors focused less on revenue beats and more on the surge in AI-related infrastructure spending. The report highlighted Alphabet raising its 2026 capital expenditure outlook to $195–$205 billion, warning of further increases in 2027, alongside a shift to negative free cash flow that weighed on the stock.

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