Last Update 03 Nov 25

Fair value Increased 21%

Alphabet's fair value estimate has climbed from $252.73 to $305.66 per share. Analysts highlight stronger growth in core businesses, accelerating revenue from AI initiatives, and sustained margin strength, which are supporting higher price targets across the Street.

Analyst Commentary

Recent analyst commentary on Alphabet reflects a strong sense of optimism, with multiple firms raising their price targets. The overall consensus suggests that Alphabet is executing well, capitalizing on AI opportunities, and maintaining durable growth in core businesses such as Search, Cloud, and YouTube. However, analysts also offer some points of caution regarding potential risks and execution challenges.

Bullish Takeaways

Bullish analysts have broadly increased their price targets for Alphabet, citing accelerating revenue growth in core segments including Search (up 15%), Cloud (up 34%), and YouTube (up 15% year over year), along with strong Q3 results across the board.
AI initiatives such as Gemini and advancements in Google’s advertising technologies are seen as key drivers of revenue upside and margin expansion. These initiatives enable Alphabet to differentiate its offerings and capture incremental market share.
Favorable outcomes from regulatory and antitrust proceedings are providing valuation support. Recent decisions were less severe than expected, which has removed significant overhang risks for the stock.
The company’s ability to monetize AI while maintaining healthy free cash flow, along with improved demand for AI infrastructure products, is bolstering confidence in sustained earnings growth and higher forward multiples.

Bearish Takeaways

Bearish analysts caution that rising capital expenditures, especially for AI infrastructure and scaling segments like Waymo, may pressure margins or require re-evaluation of long-term spending plans.
Competition in digital ads and generative AI remains intense. While Google continues to lead, some believe the rapid evolution of AI could pose disruption risks to established business lines, particularly if rivals narrow the technology gap.
Cloud backlog and revenue momentum are positive, but analysts observe that tougher political and macroeconomic environments, together with regulatory scrutiny, could challenge near-term guidance and execution.
While recent antitrust decisions have removed some headwinds, valuation concerns persist among cautious analysts, particularly after the recent rally in the stock. Some see current prices as largely reflecting optimistic forward scenarios.

What's in the News

Disney channels have been removed from YouTube TV after Google and Disney failed to reach a new distribution agreement, resulting in programming blackouts for subscribers (The Wall Street Journal).
YouTube is reorganizing its leadership team and launching a voluntary exit program for U.S. employees. The company is focusing on strengthening the platform's AI capabilities under CEO Neal Mohan (Sources).
Disney and YouTube settled a legal dispute concerning YouTube's hiring of former Disney executive Justin Connolly as global head of media and sports (Deadline).
The University of Southern California has filed a lawsuit against Google, alleging that its Maps, Earth, and Street View applications infringe on university patents (Reuters).
Uber is set to compete directly with Waymo as it plans to launch driverless rides in San Francisco next year using Lucid vehicles equipped with Nuro’s self-driving technology (Bloomberg).

Valuation Changes

The Fair Value Estimate has increased from $252.73 to $305.66 per share, reflecting a higher valuation by analysts.
The Discount Rate has fallen slightly, from 7.89% to 7.87%, indicating a modest decrease in the risk premium applied to future cash flows.
The Revenue Growth forecast has risen from 11.46% to 12.55%, suggesting improved expectations for top-line expansion.
The Net Profit Margin estimate is nearly unchanged, edging down marginally from 30.03% to 30.00%.
The future P/E ratio projection has increased from 23.97x to 26.90x, implying the market is willing to pay more for future 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.