Citizens has set a street-high $515 price target on Alphabet, well above the $425 average, pointing to Google Cloud's 82% growth rate in Q2 2026 as a key driver. The call comes as rising capital expenditures and executive departures give investors reason for caution.
Citizens sets a street-high target
Citizens' $515 price target for Alphabet Inc. (NASDAQ: GOOGL) sits above the $425 average, representing about 32 times the company's estimated 2027 GAAP earnings per share. Analyst Andrew Boone reiterated the target on August 26, along with a Market Outperform rating.
The rating rests on Alphabet's consumer distribution across search, YouTube and Android, with Google Cloud's growth and the company's profit margins acting as supporting factors.
Google Cloud growth outpaces rivals
Google Cloud's growth rate surged to 82% in Q2 2026, outpacing Amazon Web Services and Microsoft Azure. This marks a sequential acceleration from 63% growth in the first quarter and 48% growth in the fourth quarter of 2025, driven largely by enterprise demand for artificial intelligence.
The company's TPU chips are now being sold to outside customers, a business that could see meaningful growth. Morgan Stanley estimates Google may generate around $200 billion in income linked to its TPUs over the next several years.
Spending and departures weigh on the case
However, capital expenditures reached $44.9 billion in the second quarter, doubling year-over-year. The company also raised its full-year 2026 guidance to between $195 billion and $205 billion, and investors sold the Q2 print on spending concerns.
Google CFO Anat Ashkenazi has warned that free cash flow will remain squeezed as the company continues to spend aggressively on infrastructure. The company also plans to use third-party capacity to meet Cloud demand, which could create margin pressure. Scientist Jeff Dean's departure and Demis Hassabis stepping back from day-to-day leadership of Google DeepMind add to the factors working against the stock.
Hedge funds increase exposure
275 hedge funds held positions in Alphabet at the end of the second quarter, up from 265 in the previous quarter. Alphabet's cloud growth offers evidence its AI investments are translating into revenue, but investors have yet to see whether the company can convert that momentum into sustained earnings growth while absorbing its infrastructure spending.
Source: Insider Monkey
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