Alphabet’s $515 Target Looks Ambitious — But Google Cloud Is Growing 82%

Alphabet Inc.'s (NASDAQ:GOOGL) $515 price target for its stock appears ambitious, significantly higher than the $425 average estimate. Analyst Andrew Boone reiterated the target on August 26, rating the company as a Market Outperform. The target is based on Alphabet's projected GAAP earnings per share for 2027, approximately 32 times over. Analysts attribute this growth to Alphabet's strong presence on platforms like search, YouTube, and Android, along with Google Cloud's growth and the company's leading profit margins.

Despite online advertising being a major revenue source for Google, Google Cloud is emerging as a significant business segment. In Q2 2026, Google Cloud's growth rate surged to 82%, surpassing both Amazon Web Services and Microsoft Azure. This growth rate marked a substantial increase from the 63% growth rate reported in Q1 2026 and the 48% growth rate in Q4 2025, driven by high enterprise demand for artificial intelligence. Cloud service growth is accelerating, which bodes well for Alphabet Inc.

Additionally, Google is starting to sell its Tensor Processing Units (TPU) chips to outside customers, a business that could experience meaningful growth. Research by Morgan Stanley suggests Alphabet could generate around $200 billion in income from TPUs in the coming years. Combined with revenue streams from Search, Android, and YouTube platforms, a compelling case for Alphabet's stock value appreciation exists.

However, the company's aggressive spending on capital expenditures, which reached $44.9 billion in Q2 2026, doubling year-over-year, has raised concerns. The tech giant has also raised its full-year 2026 guidance to $195 billion to $205 billion. Investors have shown skepticism, with some selling shares due to spending concerns. Google's CFO, Anat Ashkenazi, has warned that free cash flow will remain squeezed as the company continues to invest heavily in infrastructure.

Other factors contributing to investor apprehension include the departure of scientist Jeff Dean from the company and Demis Hassabis stepping back from day-to-day leadership at Google DeepMind. These developments, along with increased hedge fund interest (275 hedge funds held positions in Alphabet as of Q2 2026, up from 265 in the previous quarter), indicate a complex landscape for Alphabet Inc.'s stock performance.

While Alphabet's cloud growth suggests its AI investments are translating into revenue, investors remain uncertain whether the company can sustain this momentum while managing infrastructure spending. The potential of Alphabet as an investment is acknowledged, but other AI stocks are believed to offer greater upside potential and lower downside risk.