Bank of America Maintains Buy Rating on Alphabet Despite Earnings Concerns
Alphabet (GOOGL) reported strong Q2 earnings for fiscal year 2026, with Google Cloud revenue surging by 82% and operating margins expanding. However, the stock fell sharply after the report due to concerns over rising capital expenditures and negative free cash flow. Despite this reaction, Bank of America maintained its Buy rating on Alphabet, arguing that investors are overlooking key positives such as improved consolidated operating margins and strong Cloud growth. The bank highlighted that while Wall Street focused on increased spending and negative cash flows in 2026 and beyond, the company is already seeing returns from AI investments. Google Search revenue rose by 17%, YouTube advertising grew by 13%, and Cloud backlog reached $514 billion. BofA analysts believe these metrics indicate Alphabet’s infrastructure is delivering strong utilization and pricing power. Bank of America reiterated its price target of $430 for Alphabet, forecasting significant growth in revenue and earnings per share through 2027.
Topics: AI investments Alphabet Bank of America Google Cloud growth stock price drop