Alphabet (Google) Image by Markus Mainka via Shutterstock
Alphabet’s (GOOGL) Google co-founder Sergey Brin has urged its parent company to focus more on its proprietary LLM Gemini. The report also indicates that Google’s executives have taken a more hands-on approach to directing its AI operations.
Google has recently announced that its AI wing will have a new boss. DeepMind, Google’s AI unit, CEO Demis Hassabis will step down, with Koray Kavukcuoglu, previously the AI unit’s CTO and Google’s chief AI architect, taking over as SVP. This is a strategic choice as Google faces intense pressure from OpenAI and Anthropic. Anthropic’s Mythos model and OpenAI’s GPT-5.6 have been lauded, but since the Gemini 3.1 Pro launch, no subsequent Alphabet releases have challenged the AI firms so far.
Kavukcuoglu will oversee Gemini’s development and its app and developer teams. This aligns with Brin’s vision of improving Gemini’s capabilities, as coding becomes increasingly important in developing frontier AI. Google reported that Gemini models now process 22 billion API tokens per minute and the Gemini App has 950 million monthly active users.
About Google Stock
Alphabet, the American multinational technology conglomerate and parent company of Google, is headquartered in Mountain View, California. The company is aggressively expanding its artificial intelligence operations, centralizing AI leadership and development at its main campus to accelerate progress against rivals. It has committed to massive future spending, mostly on AI infrastructure, to power its next-generation models and products. Alphabet has a market capitalization of $4.236 trillion.
Investors are optimistic about Google’s position in the AI landscape (although they are not happy about the hefty spending), and Google Cloud has become a growth engine for the company. Over the past 52 weeks, GOOGL’s stock has gained 70.44%, while it is up 10.51% year-to-date (YTD). It reached a 52-week high of $408.61 on May 18, but is down 15.4% from that level.
For a company of its stature, GOOGL’s valuation does not feel overly stretched compared to its peers. Its forward-adjusted price-to-earnings ratio of 16.75 times sits higher than the industry average of 13.12 times.
Alphabet Beats Q2 Estimates as Cloud Surges and AI Spending Rises
For the second quarter, Google’s revenues increased by 24% year-over-year (YOY) to $119.80 billion, which was higher than the $101.28 billion that Wall Street analysts had expected. Google Services revenue (mainly from advertising) rose 15% from the prior-year period to $94.54 billion. The bright spot was obviously Google Cloud revenue, which grew by 82% YOY to $24.77 billion.
Profitability also increased in tandem. Total income from operations increased by 30% YOY to $40.77 billion. This was mainly driven by Google Services. Net income per common share (diluted) rose from $2.31 to $9.11 over the same period, far higher than the $2.88 that Wall Street analysts had expected. This bottom-line surge was mainly due to net unrealized gains on its equity securities.
However, concerns about Google’s rising AI spending drove the stock down 7.1% intraday on July 23, even though the results were hotter than expected. The reported quarter marked Alphabet’s first cash burn on record. The company burned $5.90 billion in the second quarter. With Alphabet now predicted to spend $15 billion more this year and with more expected next year, the outlays behind the cash burn will likely increase.
Wall Street analysts have a mixed outlook on Google’s future earnings. For fiscal 2026, EPS is projected to surge 89.7% annually to $20.51. However, this is expected to be followed by a 28.13% decline to $14.74 in fiscal 2027. They expect the company’s EPS to climb by 2.1% YOY to $2.93 for the current quarter.
What Do Analysts Think About Google’s Stock?
Following Alphabet’s quarterly results, analysts at Roth Capital increased the stock’s price target from $435 to $440, while maintaining a “Buy” rating. RBC Capital analysts maintained a “Buy” rating and a $475 price target, while Morgan Stanley analyst Brian Nowak maintained an “Overweight” rating but lowered the price target from $415 to $400.
Tech giant Google is a widely followed name on Wall Street, with analysts awarding it a consensus “Strong Buy” rating. Of the 54 analysts rating the stock, a majority of 46 analysts have given it a “Strong Buy” rating, three analysts rated it “Moderate Buy,” while five analysts are taking the middle-of-the-road approach with a “Hold” rating. The consensus price target of $429.63 represents a 24.2% upside from current levels. Moreover, the Street-high price target of $515 reflects a 48.9% upside.
On the date of publication, Anushka Dutta did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
