MW Alphabet's stock is now beloved on Wall Street. Here's what matters next for Google.

By Emily Bary

How can Alphabet's stock build on its gains? By driving search and cloud momentum that sends earnings estimates higher, a Morgan Stanley analyst says.

Alphabet's stock has gone up by twice as much as the S&P 500 so far this year.

Investors spent the early part of this year worried about Alphabet Inc.'s artificial-intelligence positioning and Google's potential to be disrupted by Department of Justice scrutiny. Now with Gemini AI products resonating and the worst of the antitrust battles behind it, Alphabet's stock has emerged as a winner once again.

That raises the bar for the future, however, and Morgan Stanley analysts took a look Thursday at what's needed to power the stock even higher.

The big thing would be upbeat estimate revisions, according to Morgan Stanley's Brian Nowak. He's specifically focusing on opportunities for search and cloud momentum to result in more robust earnings estimates for 2026 and 2027.

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Nowak boosted his own Alphabet $(GOOG)$ $(GOOGL)$ estimates for 2026 earnings per share by 3%, while lifting his 2027 estimates by 4%. He also upped his price target to $270 from $210, with the new target representing a multiple of about 22 times estimated 2027 earnings per share. Admittedly, that's a 10% premium to its historical average of 20 times, but Nowak thinks it's warranted given the company's faster innovation and emerging status as a generative-AI winner, which "could drive durably faster top-line growth in search, cloud and YouTube."

Alphabet's stock is up 29% so far this year, twice the S&P 500's SPX gains, and Wall Street has come to appreciate the company's AI strengths. But if generative AI can help the company drive faster growth in its search and cloud businesses, those trends could "further strengthen investor confidence" in the company's AI efforts.

Admittedly, there are some unknowns as well, particularly as OpenAI's ChatGPT gets more aggressive in things like commercial search. The company debuted a new product earlier this week that will let people shop directly from chats, and it signed Etsy Inc. $(ETSY)$ as an initial partner.

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Alphabet's "accelerating pace of product improvement is going to make it challenging for ChatGPT to build a substantially differentiated product," Nowak reasoned. But he'll be monitoring adoption of new tools, since Alphabet's "durability (on the positive side) or commercial share loss (on the negative side) over the next 15 months are likely going to determine whether [Alphabet] trades toward our bull- or bear-case multiples."

His bull-case multiple is about 26 times bullish EPS estimates, arriving at a $335 target. That's 37% above where the stock recently changed hands on Thursday. Meanwhile, Nowak's bear-case target is $180, or 26% below current levels, and is based on applying a multiple of roughly 16 to more bearish earnings estimates.

Alphabet's stock is down fractionally on Thursday, to $243.68.

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-Emily Bary

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October 02, 2025 13:33 ET (17:33 GMT)

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