UBS likes what it sees at Alphabet. It’s just not ready to say “buy.”
The Swiss bank raised its price target on Alphabet (GOOGL) to $375 from $348 this week, a meaningful revision driven by key factors.
Key factors include the accelerating Google Cloud growth, easing fears about ChatGPT eroding search ad revenue, and a potentially lucrative new business hiding inside the company’s AI chip division. The neutral rating, however, stayed exactly where it was.
That combination, higher target and unchanged rating, is the tension worth unpacking. UBS is effectively telling investors that the fundamental story at Alphabet is getting better, but that the current stock price already knows it.
With Q1 2026 earnings due April 29, the next few weeks will test that judgment directly.
Why UBS raised its Alphabet price target despite keeping a neutral rating
UBS built its revised target around three distinct themes, each reinforcing the others.
The first is Google Cloud. The division posted $17.66 billion in revenue in the fourth quarter of 2025, up 48% year over year. That’s a streak that signals something structural, not cyclical, is driving demand.
CEO Sundar Pichai put a number on it during the earnings call.
“Google Cloud ended 2025 at an annual run rate of over $70 billion,” he said, attributing the growth to broad customer demand for AI products across the platform.
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Morgan Stanley analyst Brian Nowak went further, telling investors his firm’s updated backlog model outlines a path to more than 50% Google Cloud revenue growth in 2026, according to Investing.com.
That is a meaningful upside to both his own estimates and consensus Street expectations. Nowak continues to view Google Cloud as “a driver of GOOGL multiple expansion and AI-driven outperformance.”
Alphabet also just developed its eighth-generation TPU chipset
The second theme is external Tensor Processing Unit (TPU) sales. Alphabet’s custom TPUs have historically powered the company’s own AI workloads internally. UBS flags the potential to sell that capacity externally as a meaningful new revenue stream.
Alphabet recently developed its eighth-generation TPU chipset, including a version specifically optimized for AI inference, the type of computing that explodes in demand as businesses deploy AI agents.
A long-term TPU and networking supply agreement between Broadcom and Google running through 2031 adds further institutional weight to the infrastructure buildout thesis.
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The third theme is search resilience. Fears that ChatGPT would materially erode Google’s advertising dominance have quieted, at least for now. Also, Google Search revenue hit a surge in Q4 2025, up 17% year over year.
AI integration is credited with driving higher query volumes and enabling tools that are delivering measurable sales lifts for advertisers, not cannibalizing them.
Despite all three tailwinds, UBS held the neutral rating. The firm’s message is that current valuations already reflect near-term momentum. It means investors buying at today’s levels are paying for a story that’s already partially priced in.
Alphabet just crossed $400 billion in annual revenue for the first time
The UBS revision arrives in the wake of a landmark year for Alphabet.
- Total revenue (FY 2025): $402.836 billion (first time above $400B)
- Google Services revenue (Q4): $95.9 billion (up 14%)
- Google Search: Up 17%
- Google Subscriptions, platforms & devices: Up 17%
- YouTube revenue: More than $60 billion (full year, ads + subscriptions)
“It was a tremendous quarter for Alphabet and annual revenues exceeded $400 billion for the first time,” Alphabet CEO Sundar Pichai said.
Alphabet’s Board also declared a quarterly cash dividend of $0.21 per share, payable March 16, 2026, covering all three share classes. The dividend, modest relative to the company’s cash generation, reflects a capital return posture that has become more consistent as Alphabet matures.
Cheng Xin/Getty Images
Alphabet’s stock performance has also been notably great
- YTD return: Up 7.50% (versus S&P 500 up 4.11%)
- 1-year return: Up 119.80% (versus S&P 500 up 34.78%)
- 3-year return: Up 220.91% (versus S&P 500 up 72.41%)
- 5-year return: Up 199.73% (versus S&P 500 up 72.35%)
Source: Yahoo Finance
What Alphabet’s $175 billion capex bet says about where AI is headed
The number that commands the most attention in Alphabet’s 2026 outlook isn’t a revenue figure. It’s the capital expenditure guidance.
Alphabet has guided for 2026 capex of $175 to $185 billion. This represents a huge commitment to AI infrastructure that frames every other number in the company’s outlook.
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The spend is directed toward meeting customer demand for cloud and AI services, supporting Meta Superintelligence Labs efforts, and building out the compute capacity needed to sustain the inference workload explosion already underway.
That level of investment carries execution risk. Infrastructure spending at this scale takes time to convert into revenue, and the depreciation drag will weigh on reported earnings before the returns materialize. It’s one reason UBS, despite raising the target, isn’t ready to upgrade the stock.
At $337, Alphabet is trading at a level where a lot of good news is already expected. Looking forward, the April 29 answer will determine whether the reality exceeds even that.
Related: Alphabet just got a major Wall Street upgrade
