Guggenheim Affirms Buy on Alphabet, $450 Price Target

Guggenheim analyst Michael Morris reiterated a Buy rating and $450 price target on Alphabet (NASDAQ: GOOGL).

“Alphabet 3Q results were mixed, with further Cloud momentum more than offset by slower Search revenue (+12% vs. our 15%) and higher operating costs, as Alphabet-level shared AI R&D reached $7.7bn (vs. our $6.0bn) behind the Gemini 4 model push.

Search softness was driven by FX headwinds (single largest sequential driver), vertical-specific dynamics (EU de minimis impact on APAC retail, media normalization post-World Cup), and lower monetization in AI Mode, which now represents a growing share of total queries.

Management noted that y/y query growth reached the highest level in five years, suggesting the search revenue gap is a monetization timing issue though the timing of a significant AI Mode revenue unlock remains unclear.

YouTube ad revenue was below our forecast, decelerating to 9% growth after averaging 12% during 1H26.

We expect 4Q Search and YouTube growth to face continued pressure from greater sequential FX impact and, in the case of search, tough comparisons, though we see strong core usage trends positioning the segments well into 2027.

Cloud remains a standout, with backlog expanding to $561bn (+256% y/ y), operating margin hitting a record 36.2%, and an incremental contribution from TPU sales, which management expects to scale further in 4Q and materially ramp in 2027.

Specific TPU contribution remains undisclosed, and some incremental margin pressure is guided in 4Q on expanded utilization of third-party capacity.

On models, Gemini 4 Carbon was cited as successful ranking #1 among peers in independent benchmarking (link).

Capex outlook remains unchanged ($195-205bn in 2026, “significant increase” in 2027), funded by a mix of operating cash flow, debt, and equity ($27.6bn remaining under the ATM program).

Search underperformance and higher cost are incrementally negative to our model into 2027, partially offset by upward cloud estimate revisions.

We believe the combination of record query engagement, continued Cloud acceleration, and a competitive frontier model launch will support investor confidence in Alphabet’s full stack positioning and sustained earnings growth through 2027.

Maintain BUY and $450 price target.”

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