Overview
- Citing Thursday's Wolfe Research note, the firm reiterated an Outperform on Alphabet, raised its 2027 revenue forecast to $595 billion and lifted EPS to $15.89 based on expected Google Cloud strength.
- Alphabet reported Google Cloud revenue rose 82% year over year to $24.8 billion in Q2 and disclosed a $514 billion cloud backlog with a 35.6% cloud operating margin.
- Wolfe projects an outsized Q3 cloud surge of about 125% year over year, a figure well above the Street’s roughly 87% consensus and a key driver of higher price targets.
- Investors and management are watching sharply higher infrastructure spending closely after Q2 capex jumped to about $44.9 billion and full-year guidance was raised to $195–$205 billion, which company leaders say will squeeze free cash flow.
- Analysts point to Alphabet’s vertical integration—TPU chips, Gemini models, cloud services and consumer distribution—as the mechanism to convert enterprise AI demand into recurring revenue while valuation will depend on whether demand sustains and capex growth moderates.