Alphabet’s stock has been on a tear, climbing roughly 23% over the past month to hit a fresh 52-week high, as the market prices in optimism ahead of Wednesday’s first-quarter earnings release. But the real question hanging over the Google parent is whether its staggering infrastructure spending spree is translating into tangible returns.
The Cloud Conference That Shifted the Narrative
Last week’s Google Cloud Next 2026 conference in Las Vegas provided analysts with plenty of ammunition. The event showcased a company positioning itself as the only vertically integrated player in the AI era, with proprietary eighth-generation chips and a new “Agentic Data Cloud” offering. CEO Sundar Pichai dropped a striking statistic: 75% of all new code written at Google is now AI-generated, up from 50% last autumn.
The user numbers presented at the conference were equally impressive. Google’s Gemini app now boasts 750 million monthly active users, while AI Overviews in search reach 1.5 billion users per month. Cloud chief Thomas Kurian declared the AI testing phase over, noting that roughly 75% of cloud customers are now using AI products in production. The company’s proprietary models are processing 16 billion tokens per minute, a significant jump from the previous quarter.
Wall Street’s Bullish Bet
Analyst enthusiasm has been building ahead of the numbers. BMO Capital raised its price target to $410 from $400, reiterating a buy rating. Analyst Brian Pitz argues that Alphabet represents the best AI exposure in his coverage universe, citing proprietary web traffic data showing accelerating visits to Google.com. Annual growth has picked up by 100 basis points to 2%, which Pitz interprets as evidence that AI Overviews complement rather than cannibalize traditional search.
Other banks have followed suit. Current price targets include JPMorgan at $395, Cantor at $395, KeyCorp at $380, and UBS at $375. The broader analyst consensus sits around $377, with 26 buy ratings against five holds and not a single sell recommendation.
The Earnings Math Gets Complicated
Alphabet reports after the bell on Wednesday, April 29. The market expects earnings per share of $2.68 on revenue of roughly $107 billion. That would represent a decline from the $2.81 reported in the year-ago quarter, which famously beat expectations by 40%.
Should investors sell immediately? Or is it worth buying Alphabet?
The culprit is clear: Alphabet’s capital expenditure plans for 2026 range between $175 billion and $185 billion, nearly double last year’s $91.4 billion. Depreciation charges rose 38% in 2025 to $21.1 billion, and the CFO has warned that growth will accelerate further this year. Some analysts are even projecting negative free cash flow for 2026.
Cloud Growth as the Litmus Test
The cloud segment carries the burden of proving the investment thesis. Google’s cloud backlog grew 55% to $240 billion, while annual segment revenue climbed from $43.2 billion to $58.7 billion. BMO expects that figure to jump another 44% to $84.8 billion in 2026. The market is looking for cloud revenue growth of over 50% in the first quarter.
New business wins are piling up. PepsiCo signed a multiyear deal for Google’s Gemini platform, and the company unveiled new TPU 8t and 8i processors designed to accelerate model training. These developments suggest that Alphabet is generating real revenue from AI, not just talking about it.
The Risk That Won’t Go Away
The stock’s recent rally leaves little room for disappointment. Trading at a new all-time high of €293.75 on Friday, Alphabet’s valuation already reflects considerable optimism. The critical question for Wednesday’s call isn’t just about past performance but about future spending discipline.
Investors will be scrutinizing management’s commentary on capital expenditure plans and whether the massive infrastructure build-out can sustain earnings per share growth. The cloud business must demonstrate that rising depreciation charges can be offset by accelerating revenue. If Alphabet can show that its AI investments are paying off, the stock may have further to run. If not, the market’s recent enthusiasm could quickly evaporate.
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