Analysts like Google’s earnings report, even if investors didn’t

Investors aren’t reacting positively to Google’s supercharged spending plans — the company said it will nearly double its capital expenditure this year — with the stock down about 4% today after reporting earnings Wednesday. But analysts are more upbeat.

Here’s a selection of recent reports:

Bank of America Global Research titled its note “Gemini halo effect shining bright,” arguing that “agentic capabilities and monetization of the Gemini app (750mn MAUs) with advertising are revenue catalysts ahead.” The firm’s analysts also cited record Google Search usage as evidence that AI is driving an “expansionary cycle,” not cannibalizing demand.

“We continue to see opportunity for better monetization of zero-click searches that are being converted to AI Overviews as a key upside driver from here,” they wrote.

Morgan Stanley Research analysts struck a similar bullish tone, arguing that Google’s accelerating revenue and sharply higher capital spending are reinforcing the advantages of the largest tech platforms. The firm said Alphabet is showing a “strong GenAI ROIC signal” across both Search and Google Cloud, likening the moment to Meta’s recent earnings-driven reset.

They noted that Search revenue rose 17% year over year while Google Cloud grew 48%, far ahead of expectations. Even more important for durability, Google Cloud backlog jumped 55% quarter over quarter to roughly $240 billion, signaling sustained demand for AI infrastructure and enterprise AI services.

“The leading scaled companies with the most data, reach and ability/willingness to invest are seeing the benefits of their flywheels,” the analysts wrote, arguing that the gap between megacaps and smaller tech players is likely to widen faster than previously expected.

Morningstar analyst Malik Ahmed Khan said the fourth-quarter results reinforced Alphabet’s shift from a perceived AI laggard to a “clear leader in AI,” with AI now driving growth across both Search and Cloud.

While investors remain wary of Alphabet’s nearly doubled capital spending, Morningstar called the mammoth plan a “vote of confidence in AI demand,” saying the company is well positioned to turn that investment into revenue across Search, Cloud, and emerging agentic use cases.

Wedbush Securities’ Dan Ives raised Alphabet’s price target to $370, citing strong fourth-quarter results that reinforced the company’s position as a “leading AI beneficiary.” Like the others, he cited strong Search and Cloud growth along with the Cloud revenue backlog.

While Alphabet’s projected $175 billion to $185 billion in 2026 capital spending is likely to pressure margins, the firm viewed the investment as supportive of long-term growth, pointing to rising Gemini adoption, expanding cloud margins, and early progress monetizing AI across Search and Cloud.

“We see additional opportunity to unlock more use cases and drive incremental monetization,” Ives wrote.

Deutsche Bank analysts also came out bullish, saying Alphabet delivered a strong quarter despite a “difficult setup” after the stock had already rallied about 20% since Q3.

While Deutsche acknowledged Alphabet’s 2026 capex guidance was well above consensus, it argued the spending will help build an infrastructure “moat that few (if any) can replicate — and perhaps just as importantly, one that Alphabet can best monetize” across its advertising, subscription, and cloud businesses.

Alphabet’s vertically integrated cloud strategy, which spans its own data centers, custom chips, software, and AI models, is increasingly resonating with customers, the analysts said. They noted that Google added more $1 billion-plus cloud deals in 2025 than in the prior three years combined, underscoring the strength of demand.

Deutsche raised its price target to $390 from $370.