Overview
- On May 20, Bank of America reiterated a Buy rating and set a $430 price target for Alphabet after Google’s I/O disclosures.
- The firm pointed to I/O adoption figures — roughly 2.5 billion users for AI Overviews, 1 billion for AI Mode, and about 900 million Gemini MAUs — as evidence Google is shifting Search toward AI-native experiences.
- BofA highlighted Google Cloud’s momentum, noting Q1 revenue growth of about 63% and a backlog that nearly doubled to roughly $460 billion as a sign of durable enterprise demand.
- Analysts warned near-term pressure from a planned capex surge that BofA projects will cut free cash flow from about $73.3 billion in 2025 to roughly $44.1 billion in 2026, making return on AI investments a multi-year story.
- The note lists key downside risks that will determine outcomes: slower monetization of AI queries versus traditional search, search traffic loss to rivals, EU Digital Markets Act compliance burdens, and execution on Cloud and agent products.