Alphabet Inc

Analyst thesis

Our recommendation is based on:

• Alphabet is successfully defending its core advertising and search engine businesses by evolving keyword-based search into conversational intent. The integration of Gemini into Search not only protects the Group's competitive position; it expands it by surfacing higher-value, targeted ads within artificial intelligence (AI) overviews.

• YouTube is undergoing a long‑term shift. Short videos (shorts) and connected TV (CTV) viewing help brands reach vast audiences and build awareness, while new shopping features allow viewers to purchase products directly from the videos. Together, this helps YouTube turn attention into sales and helps boost advertising revenue.

• Google Cloud remains the primary growth accelerator, fuelled by a $240 billion backlog. The current surge in AI workload demand is expected to unwind into a mature, high-margin utility phase by 2028.

• Alphabet has raised its 2026 CAPEX guidance to $185 billion, signalling a strong commitment to realising AI-driven gains. However, this raises concerns over the headwind to free cash flow and the time pressure to justify substantial spending and near-term returns on investment.