Last Update05 Oct 25
Fair value Increased 3.14%

Alphabet's fair value estimate has increased by approximately $7 to $241.59, as analysts cite ongoing AI advancements, the easing of regulatory headwinds, and stable growth in core metrics as factors underpinning the higher price target.

Analyst Commentary

Recent revisions and research show that market sentiment toward Alphabet has become increasingly constructive, though some points of skepticism remain. Below is a summary of the prevailing bullish and bearish perspectives driving analyst outlooks and price target changes.

Bullish Takeaways

Bullish analysts emphasize Alphabet’s durable dominance in core businesses, particularly search, where the company maintains over 90% market share and strong commercial-query leadership despite the rise of generative AI.
AI innovation and integration across advertising, cloud, and user-facing products are expected to deliver substantial incremental value. Analysts cite the positive impact of Gemini and other AI models on monetization and engagement at YouTube, Google Cloud, and broader ecosystem products.
The recent resolution of regulatory uncertainties, such as favorable antitrust rulings, has alleviated major stock overhangs. This supports multiple expansion arguments and provides a clearer runway for value realization.
Ongoing improvements in Google’s technological infrastructure, including its TPUs, position Alphabet as a key player in the accelerating AI compute landscape and help narrow the gap with industry leaders in AI hardware.

Bearish Takeaways

Bearish analysts remain cautious on valuation following Alphabet’s rally, with concerns about upside potential from current levels given rich near-term multiples.
Although the regulatory climate has improved, there are lingering uncertainties regarding the long-term impact of restrictions on exclusivity agreements and evolving remedies, which could influence future margins or partnership dynamics.
Some price target increases have been accompanied by neutral or accumulate ratings, reflecting hesitancy around execution in a highly competitive AI environment where peer solutions are also advancing rapidly.
AI-driven search disruption and the slow pace of material conversion impact from new AI search entrants lead some analysts to be cautious regarding forecasts for advertising growth acceleration.

What's in the News

Gradient Ventures, Google's AI-focused investment arm, has spun out of Alphabet to operate independently and attract additional external investors alongside Google. (WSJ)
Alphabet is planning to sell or spin off its life sciences unit, Verily, after moving it toward operational independence over the past two years. (Bloomberg)
Google cut staff in its Cloud division, primarily in user experience roles, as part of ongoing reorganizations within the business. (Business Insider)
A U.S. District Judge denied Apple, Google, and Meta's requests to dismiss lawsuits alleging they promoted illegal gambling by hosting and taking commissions from casino-style apps. (Reuters)
YouTube agreed to pay $24.5 million to settle a lawsuit filed by former President Donald Trump over the suspension of his account following the January 6 events. (WSJ)

Valuation Changes

Fair Value Estimate has risen slightly from $234.23 to $241.59, reflecting a modest increase in analysts’ price targets.
Discount Rate has declined marginally from 7.96% to 7.88%. This indicates a slightly lower perceived risk associated with Alphabet’s future cash flows.
Revenue Growth Projection has increased modestly from 11.41% to 11.46%. This suggests slightly improved expectations for the company’s topline expansion.
Net Profit Margin forecast has edged up from 29.02% to 29.22%, signaling modest optimism regarding profitability improvements.
Future Price-to-Earnings (P/E) ratio has risen from 23.07x to 23.54x. This reflects a higher multiple being applied to Alphabet’s anticipated earnings.

Accelerating AI adoption and innovation are driving increases in user engagement, search monetization, and sustained revenue growth across core businesses.
Diversifying products and expanding globally, particularly in cloud services and subscriptions, are improving margins and strengthening long-term growth potential.
Heavy infrastructure spending, reliance on ad revenue, legal pressures, unprofitable new ventures, and rising competition threaten Alphabet's future profitability and market position.

Catalysts

About Alphabet

Offers various products and platforms in the United States, Europe, the Middle East, Africa, the Asia-Pacific, Canada, and Latin America.What are the underlying business or industry changes driving this perspective?

Accelerating adoption of AI-powered features (such as AI Overviews, AI Mode, and Gemini 2.5) is increasing user engagement and commercial search query volume, positioning Alphabet to monetize a larger user base and expand advertising-driven revenue on a forward-looking basis.
Surging demand for Google Cloud's AI infrastructure and services, evidenced by record multi-billion dollar deals, a 38% YoY increase in backlog, and ongoing capacity expansion, suggests continued revenue growth and margin improvement as scale efficiencies are realized.
Rapid growth in YouTube Shorts and expanding YouTube subscription offerings are diversifying revenue streams and boosting monetization, which should drive both top-line growth and incremental improvements in net margins as premium content and subscriptions scale.
Continued momentum in global internet penetration, smartphone adoption, and emerging market engagement (e.g., Lens, Circle to Search, virtual try-on) is enlarging Alphabet's addressable market and supporting scalable ad and subscription revenue expansion.
Alphabet's significant investment in custom AI hardware (TPUs), software optimization, and R&D is expected to further improve operating leverage, translating sustained innovation leadership into higher productivity, operating margins, and long-term earnings growth.

Alphabet Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Alphabet's revenue will grow by 11.3% annually over the next 3 years.
Analysts assume that profit margins will shrink from 31.1% today to 28.9% in 3 years time.
Analysts expect earnings to reach $148.4 billion (and earnings per share of $12.81) by about September 2028, up from $115.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as $126.4 billion.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.9x on those 2028 earnings, down from 25.1x today. This future PE is greater than the current PE for the US Interactive Media and Services industry at 17.0x.
Analysts expect the number of shares outstanding to decline by 1.2% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.97%, as per the Simply Wall St company report.

Alphabet Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Alphabet's record-high capital expenditures-forecasted to reach $85 billion in 2025 and likely to increase into 2026-will place sustained pressure on net margins and earnings due to accelerating depreciation and infrastructure costs, creating long-term risk if revenue growth does not keep pace.
Despite robust growth in Search and YouTube, Alphabet remains highly dependent on advertising revenues from these sources, and any shift in consumer behavior toward alternative platforms (such as VR, AR, decentralized social, or privacy-centric apps) or slowing ad market growth could reduce revenue and compress profitability.
Increasing legal and regulatory pressures-including a $1.4 billion legal settlement this quarter, ongoing antitrust scrutiny globally, and tightening data privacy laws-pose ongoing risks to Alphabet's core business models, potentially forcing structural changes that could lower market share and long-term earnings power.
Alphabet's substantial investments in "Other Bets" businesses, notably Waymo and experimental hardware (e.g., AI-enabled glasses), continue to generate significant operating losses without a clear path to material profitability, potentially eroding group net margins if these efforts fail to scale commercially.
Elevated competition in both digital advertising (from platforms like Amazon, TikTok, and retail media networks) and cloud (from AWS, Azure, and open-source AI providers), coupled with industry trends such as increased ad blocking and a shift to zero-click/AI-overview search responses, could erode Alphabet's ad pricing power and reduce core revenue and earnings growth over the long term.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of $231.48 for Alphabet based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $300.0, and the most bearish reporting a price target of just $166.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $512.6 billion, earnings will come to $148.4 billion, and it would be trading on a PE ratio of 22.9x, assuming you use a discount rate of 8.0%.
Given the current share price of $239.63, the analyst price target of $231.48 is 3.5% lower. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.