William Blair Reiterates Outperform Rating on Alphabet

William Blair analyst Ralph Schackart reiterated an Outperform rating on Alphabet (NASDAQ: GOOGL).

“The stock is trading up about 6% in after-hours in response to it surpassing very high investor expectations, particularly in search and cloud.

Investors are likely gaining comfort with the elevated capital expenditure level given that the company’s full-stack approach to AI is starting to meaningfully materialize in its results.

The expectation of a significant increase to capital expenditures in 2027 further speaks to growing compute needs and the confidence the company has in its AI products.

Moreover, the increase in the dividend likely signals it feels confident in its future cash flows and ability to fund this unprecedented capital expenditure growth.

Using our DCF framework, we forecast roughly 15% to 20% upside in the shares through the next 12 months using a discount rate of 10% and an EBITDA multiple of 16 times.

Due to Google’s continued AI product innovations and successful leveraging of AI technologies to improve its offering across all key operating segments, we maintain our Outperform rating.

Risks to our thesis include privacy and regulation concerns, U.S. government court rulings, a worsening macro environment that impacts advertising spend, AI’s potential impact on search, and growing competition from Meta, Microsoft, and Amazon.”

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