Alphabet's (GOOG, GOOGL) 2027 capital expenditure might climb further as input costs rise and Google continues to invest in frontier model training, exacerbating the potential for downward revisions to organic EPS excluding mark-to-market on equity investments, UBS said in a Thursday note.

Ongoing higher hiring needs will further add to pressure on the company's EPS, UBS said, adding that expected short-term margin compression means shareholders for now have to discount quarter-on-quarter margin improvement noted on Cloud.

Noting upside on the stock, UBS said that the company's $510 billion backlog, higher than its $482 billion projection, will result in some upward movement to Cloud estimates. Additionally, better-than-expected Q2 revenue supports improved mid-term ad dollar accretion, especially on YouTube, the firm said.

UBS lowered the company's price target to $379 from $400 and maintained its neutral rating.