Needham Maintains Buy on Alphabet, $450 Price Target

Needham analyst Laura Martin reiterated a Buy rating and $450 price target on Alphabet (NASDAQ: GOOGL).

“In this note, we discuss the capital intensity, revenue and valuation of Waymo within the GOOGL empire.

Special thanks to Needham’s Uber & LYFT analyst, Bernie McTernan, for his contributions to this report.

At ~$100B of value, Waymo is too small to be anything but a distraction for GOOGL, at a time when it’s engaged in a race for AI supremacy, where winning is mission-critical for the future of its $3.6T equity value (our view).

GOOGL should offload Waymo’s hardware costs to a 3rd party and pivot to an asset-light management model instead of owing cars itself, and/or spin off all or part of Waymo while retaining data rights, since Waymo’s proprietary data benefits Gemini.

Capital intensity.

We estimate that GOOGL’s capital investment in Waymo cars will total ~$4B (in addition to operating losses) by the end of 2028, at a time when GOOGL is selling equity and debt to fund its $200B+/year CapX investments in AI.

We think allocating capital to Waymo was fine before AI, but now GOOGL has higher ROIC options for its CapX because AI has higher ROIC’s than Waymo.

Therefore, GOOGL’s CapX should only be allocated to AI over the next 3 years (not Waymo), in order to protect its share price, we argue.”

“In this note, we calculate the value of YouTube at $340B. In addition, YouTube creates value for GOOGL in 3 ways: 1.

YouTube’s revenue growth is strong, at around 20%/year, and it is becoming increasingly subscription driven, which aids GOOGL’s revenue diversification away from ad revs; 2.

The ad market is moving toward full-funnel ad buying.

YouTube’s $45B reported CTV ad revs in FY26 makes GOOGL’s $260B of website ads more valuable by allowing ad buyers to use GOOGL as a 1-stop shop to buy “top of funnel” (awareness) ads, consideration (mid-funnel) ads, and “bottom of funnel” ads (Google search ads); and, 3.

GOOGL’s Gemini LLM must be an AI winner for GOOGL shares to work, and YouTube provides a constant flow of proprietary and differentiated data for Gemini, we believe.

YouTube is 10% of GOOGL’s Value, at $340B We estimate that YouTube’s FY26 net advertising revs will reach $20B (after subtracting 55% creator rev-share fees), which we value at a multiple of 7x (RDDT’s 2026E EV/rev multiple), or $140B.

We estimate that YouTube’s FY26 subscription revs will reach ~$34B, which we value at a multiple of ~6x (NFLX’s 2026E EV/rev multiple), or ~$200B.

By implication, YouTube is worth ~$340B, representing ~10% of GOOGL’s total EV.”

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