Canaccord Keeps Buy on Alphabet, $450 Price Target

Canaccord analyst Maria Ripps reiterated a Buy rating and $450 price target on Alphabet (NASDAQ: GOOGL).

“Google reported mixed Q3 results relative to expectations, with total revenue roughly in line with consensus, OI below expectations on TPU hardware costs and higher R&D, and the FCF loss widening q/q on the TPU inventory build and EC fine.

Cloud revenue more than doubled, well above our estimate and consensus, with TPU system sales now a meaningful contributor, and backlog increased ~9% sequentially while operating margins were up again q/q.

Search decelerated to LDD growth and landed below expectations, which management attributed to FX, the EU’s elimination of its de minimis exemption weighing on some APAC retail advertisers, and media and entertainment budgets normalizing after the World Cup.

The company also highlighted the lower monetization of fast-growing AI Mode queries as a headwind, while maintaining that the majority of AI Mode queries are incremental.

The usage data Google disclosed remained strong, with query growth the highest in five years and similar click-through rates on sponsored and organic product listings within AI Mode.

With its AI Mode ad experiments having tested well, Google is now scaling ads to more users and queries, including international markets for the first time and multi-turn ads in the US.

That said, the bear case is that more of the AI Mode query growth replaces traditional searches than management suggests, with the shift toward lower-monetizing surfaces then outweighing the incremental queries.

For Q4, the outlook calls for a slightly larger FX headwind, difficult search comps, and Cloud margin headwinds as 3P compute capacity ramps, although FY26 CapEx guidance was left unchanged.

GOOGL shares are under pressure after hours, reflecting the Search shortfall and with the wider FCF loss possibly adding pressure.

While we are trimming our search estimates, with much of the softness reasonably explained by factors beyond AI Mode, and with ads now scaling across AI Overviews and AI Mode to more users and queries, we expect the monetization gap to narrow from here.

We maintain our BUY rating and PT.”

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