Goldman Sachs stated that Alphabet is translating its technological edge into tangible financial returns through its "full-stack AI" strategy, spanning from foundational models and cloud infrastructure to end-user applications. The firm maintains a Buy rating and raises its price target to $330.

On October 31, Goldman Sachs highlighted in its latest research report that Alphabet's Q3 earnings demonstrated the competitive advantages of its comprehensive AI ecosystem. Analyst Eric Sheridan noted that Alphabet has secured strategic positioning across the AI value chain—from model development and cloud infrastructure to consumer and enterprise applications—with this vertical integration now driving financial performance.

Alphabet's consolidated revenue surpassed $100 billion for the first time in Q3, with Search paid clicks and cost-per-click both growing 7% YoY. YouTube ad revenue rose 15%, exceeding expectations, while Google Cloud’s 34% revenue growth and 23% operating margin stood out as key highlights. Goldman Sachs emphasized management’s optimistic commentary on AI-driven workload competitiveness during the earnings call, signaling confidence in long-term growth prospects.

Concurrently, Alphabet raised its 2025 capital expenditure (CapEx) guidance from approximately $85 billion to $91–93 billion. Goldman Sachs adjusted its 2026 CapEx estimate to ~$122 billion, reflecting a 32% YoY increase and underscoring Alphabet’s continued heavy investment in AI infrastructure.

Despite macroeconomic and digital ad demand concerns, Goldman Sachs noted that Alphabet has overcome skepticism around AI adoption over the past year. Management expressed strong optimism about scaling AI solutions for consumers and enterprises. Consequently, Goldman Sachs reiterated its Buy rating and lifted its 12-month price target from $288 to $330.

**Core Businesses Show Broad-Based Growth, Cloud Stands Out** Alphabet’s core businesses exhibited robust growth in Q3. Search & Other revenue rose 15% YoY, with paid clicks and CPC both up 7%, indicating strength across verticals and alleviating fears about AI disrupting traditional search monetization.

YouTube’s combined ad and subscription business maintained momentum, with ad revenue climbing 15% YoY. Management highlighted rising subscription contributions, disclosing over 300 million total subscribers across services, with YouTube Music and Premium users delivering higher gross margins than ad-supported tiers.

Google Cloud emerged as the standout performer, with revenue up 34% YoY and backlog surging 79% to $155 billion. Operating margins reached 23%, while billion-dollar deals signed in the first three quarters of 2024 already exceeded the total from the past two years—a testament to surging enterprise AI demand.

**CapEx Surge Reflects Infrastructure Push** Alphabet’s raised 2025 CapEx guidance (60% servers, 40% data centers) signals intensified infrastructure investment. While no 2026 guidance was provided, Goldman Sachs projects ~$122 billion in CapEx (+32% YoY).

The firm noted dual financial impacts: Q3 depreciation rose 41% YoY to $1.6 billion, with further acceleration expected in Q4. However, Alphabet maintains disciplined efficiency, with GAAP operating margins at 35.7% in Q3 and full-year margins projected near 38%, rising to 39.5%–39.6% in 2026–2027.

**AI Scaling Across Search and Enterprise** Management showcased aggressive scaling of AI solutions, from traditional search to AI Overviews, Gemini, and multimodal queries. Goldman Sachs believes Alphabet is uniquely positioned to navigate search evolution, leveraging its massive user base, rapid innovation, infrastructure scale, and cost advantages over peers. The market underappreciates Alphabet’s dual strengths: AI distribution (via apps with >1 billion users) and computational scale to drive efficiency.

Long-term, Alphabet is well-positioned in both current (desktop/mobile) and future (AI/ML, personalization) computing paradigms. As AI monetization shifts from infrastructure to platform and application layers, its full-stack capabilities will become even more valuable.

**Long-Term Growth Options: Quantum and Beyond** Beyond core businesses, Goldman Sachs highlighted upside potential from Waymo and quantum computing projects—long-term bets that provide optionality despite limited near-term financial impact.

**Raised Earnings Estimates** Goldman Sachs lifted its GAAP EPS forecasts: 2025 to $10.49 (from $9.86), 2026 to $10.71 (from $10.51), and 2027 to $12.34 (from $11.96).

At current levels, Alphabet trades at 26.5x and 23.0x 2026–2027 GAAP EPS (ex-cash), with ~$75 billion remaining in its share repurchase program.

The $330 price target blends two valuation methods: 22x EV/GAAP EBITDA (next 12 months + 1 year) and a 30x multiple on FCF-SBC (next 12 months + 4 years), discounted back three years at 12%. This implies ~20% upside from current levels.