Alphabet (GOOGL) has the most popular search engine, is a hyperscaler, and one of the best-positioned companies in the artificial intelligence race. The company classifies its two revenue streams as Google Cloud and Google Services.
The stock is up about 17.8% year to date, at the time of writing, Thursday morning, April 30, according to Yahoo Finance. Meanwhile, the SPDR S&P 500 index (SPY) is up about 4.5% in the same period.
Following a very strong Q1 report on April 29, which beat Wall Street consensus estimates, the stock is soaring 5.5% and trading near $369.3.
Other key news for the stock:
- Google has signed a deal to provide the Pentagon with its AI models for classified work, reported The New York Times.
- On April 22 at Google Cloud Next, the company unveiled its eighth generation of custom Tensor Processor Units (TPU).
- Alphabet said it will invest up to $40 billion in Anthropic, reported Reuters.
Key facts from Google’s earnings report
Alphabet revenue grew 22% year over year to $109.9 billion. However, revenue fell approximately 3.4% quarter over quarter, from $113.8 billion in Q4 2025.
Google Ceo Sundar Pichai touted strong subscription sales during the earnings call.
“Gemini Enterprise is seeing tremendous momentum with 40% growth quarter-over-quarter in paid monthly active users. In subscriptions, this was our strongest quarter ever for our consumer AI plans, primarily driven by adoption of the Gemini app. The number of paid subscriptions has now reached 350 million, with YouTube and Google One being the key drivers.”
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On top of this, the revenue backlog has nearly doubled, and according to FORM 10-Q, it is at $467.6 billion of remaining performance obligations (RPO), with most of those ($462.3 billion) coming from Google Cloud.
The caveat is as stated in the form: “We expect to recognize just over 50% of the revenue backlog as revenues over the next 24 months, with the remainder to be recognized thereafter.”
10-Q is clear about deferred revenue being significantly smaller than RPO: “Total deferred revenue as of December 31, 2025, was $8.6 billion, of which $3.5 billion was recognized as revenues for the three months ended March 31, 2026. Total deferred revenue as of March 31, 2026, was $9.8 billion.”
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Bank of America raises Google stock price target
Following the report’s release in a research note shared with me, Bank of America analyst Justin Post and his team updated their opinion on Google stock.
Analysts said that revenue (with Traffic Acquisition Costs subtracted) and EPS of $94.7 billion and $5.11, respectively, beat Wall Street consensus estimates of $91.7 billion and $2.73.
The team noted that the Q1 operating margin at 41.9% beat the Wall Street consensus at 39.6%.
Post raised his 2026 revenue estimate by 4% to $424 billion and EPS by 26% to $14.43. For 2027, he raised revenue estimates by 10% to $522 billion, and EPS by 12% to $14.49. He also raised 2027 capex estimate by 25% to $257 billion.
Related: Bank of America reassesses Nvidia stock, sets new forecast
“Another quarter of strong revenues and margins reinforces our view that Google is a top AI play, with increasing search usage, improving ad targeting, durable Cloud advantages from Gemini/TPUs, and growing subscription revenues from Gemini,” Post wrote in the note.
The team said they believe AI tailwinds for Search are still in an early phase, and future LLM enhancements will lead to durable growth.
Post reiterated a buy rating for Alphabet stock and raised the price target to $430 from $370, based on a 28 multiple of his estimate for core Google GAAP EPS for 2027 plus cash per share.
Analysts noted downside risks for Alphabet stock:
- Loss of search traffic to AI tools from competitors
- LLM integration in search that takes longer than expected
- Revenue pressure from compliance with the EU Digital Markets Act
- Potential for increasing capex and lower FCF, given AI investments
Related: Morgan Stanley revamps Oracle stock price target
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