The massive AI infrastructure giving investors the jitters, Alphabet’s intention to spend very heavily on its AI endeavors in 2026 has grabbed the headlines recently. Alphabet stock seems to be following a familiar pattern in this earnings season, too. It has delivered an excellent quarterly readout, but the market’s response of sending shares down was the immediate aftermath on account of high capital expenditure, exceeding the expectations of Wall Street.
Earnings Outperformance Reinforces Operating Strength
Alphabet projected $175-$185 billion capex for 2026, which is a significant jump from $91.5 billion in 2025. This figure is also far beyond the analyst’s estimate of $142 billion, which was already at the high end of street expectations. The metrics of Alphabet, Inc, tell the story of a successful quarter. The revenue rose 18% year-over-year to $113.8 billion, which exceeded the expectations of $111.15 billion. The revenue was driven by faster growth in Google Services and Continued momentum at the Google Cloud, which generated $17.7 billion in revenue, up 47.8%. While the search growth accelerated 17%, supported by the integration of AI. Gemini now has 750 million monthly active users with rising engagement. In short, the EPS came in at $2.82, again ahead of Wall Street’s $2.64 forecast.
On February 8, 2026, J.P. Morgan analyst Doug Anmuth reiterated a strong buy rating on Alphabet, urging investors to “ignore the noise” surrounding the company’s massive capital expenditures. He views this spending as a “position of strength” driven by high returns in AI, cloud, and search.
Multi-Year Backlog Underscores Durability of Growth
Anmuth expected pushback around the increasingly capital-intensive profile and the resulting pressure on the operating income and free cash flow. Despite the management being stressed over the ongoing efficiency efforts across tech and engineering, server deployment, TPU enhancements, and headcount and other areas, Anmuth still expects the depreciation to accelerate sharply this year, which the analyst models at +73%. This step-up in capex is a meaningful headwind to free cash flow, which Anmuth models at $29 billion this year, down 61%, though Google continues to hold a net cash position of $80 billion. However, for Anmuth, the investment case for GOOG is still highly favourable.
Sharing his insight, the ‘5-star’ analyst reported that while some may view this financial profile and outsized spending as Google shifting closer to Meta, he emphasizes a clear return on Google’s investments across Gemini AI, Cloud, Search, and how Google differentiates with a very meaningful multi-year backlog.
Strong Balance Sheet Strengthens the Bull Case
Backing up Anmuth’s bullish stance, he keeps an overweight rating on GOOG shares and is growing more confident in the upside story, citing Alphabet’s $80 billion net cash position and strong business fundamentals. He further lifted his price target from $385 to $395, implying a 22% upside over the coming 12 months, if the target strikes positive. The broader analyst community is also staying constructive. Across the Street, GOOG collects 25 Buy ratings alongside the 7 Holds, giving the stock a Strong Buy consensus. Currently, the average price target stands at $376.63, pointing to a further ~17% gain from the current levels in the period ahead.
