Freedom Broker analysts pick Alphabet as the idea of the week

Freedom Broker experts named Alphabet Inc. (GOOGL) shares the investment idea of the week and recommend buying them with a target price of $400 over a two-month horizon. At the current quote of $338,4, the upside potential is 18,20%. The main arguments are the rapid expansion of Google Cloud, the commercialization of in-house AI chips, and a lower risk of a forced breakup of the advertising business.

What Alphabet does

Alphabet is a technology holding company that brings together the Google search engine, the YouTube video service, the Android operating system, the Google Cloud platform, and artificial intelligence developments. The company earns most of its revenue from advertising, but cloud services and enterprise AI solutions are becoming increasingly significant sources of revenue and profit.

Alphabet has ways to recoup its AI investments

According to Freedom Broker analysts, rising capital expenditures are weighing on Alphabet shares, but the company has already created mechanisms to earn back these investments. The 2026 capital spending forecast has been raised to $195–205 млрд: funds are being directed to servers, data centers, and AI computing capacity.

The main proof of the effectiveness of these expenses was Google Cloud. In Q2 2026, the cloud segment’s revenue grew 82% year over year to $24,768 млрд. Operating profit increased from $2,826 млрд to $8,814 млрд, and operating margin expanded from 20,7% to 35,6%.

The portfolio of signed but not yet fulfilled cloud contracts reached $514 млрд versus $106 млрд a year earlier. Alphabet expects to recognize more than half of this amount as revenue within two years. Analysts believe that such a volume of commitments increases the predictability of Google Cloud’s дальнейшего роста.

TPUs are becoming an independent source of revenue

A second channel for recouping AI investments is its own TPU tensor processors. Alphabet initially developed these chips for internal computing and to reduce dependence on Nvidia (NVDA), but it is now offering them to external customers and deploying them in third-party data centers.

Anthropic has contracted 5 ГВт of TPU-based computing capacity, and Broadcom (AVGO) has confirmed the deployment of 1 ГВт this year. According to analysts, the shift from internal TPU use to selling them to customers creates an additional source of monetization of capital expenditures for Alphabet.

Court ruling reduced regulatory risk

Another positive factor was a Virginia court decision on September 2. The court denied the U.S. Department of Justice’s request for the forced sale of the AdX ad exchange and part of the DoubleClick for Publishers platform, through which Alphabet places ads on third-party sites. Instead of a breakup of assets, the company received behavioral remedies.

The risk of a forced restructuring of the advertising business had persisted since April 2025, when the company was found to be a monopolist in the ad-tech market. The decision does not affect the search business or YouTube. The open-display advertising segment, with revenue of about $30 млрд, remains at risk, but analysts expect a prolonged appeals process.

Alphabet revenue rose to $119,796 млрд

In Q2 2026, Alphabet’s total revenue increased 24% year over year—from $96,428 млрд to $119,796 млрд. Google Services revenue rose 15% to $94,540 млрд. Revenue from Google Search & other increased 17% to $63,271 млрд, and YouTube advertising revenue grew 13% to $11,055 млрд. Alphabet’s operating profit rose 30%, from $31,271 млрд to $40,770 млрд, and operating margin widened from 32% to 34%.

Net income available to holders of common shares reached $112,107 млрд versus $28,196 млрд a year earlier, and diluted earnings per share increased from $2,31 to $9,11. A significant portion of the growth was tied to unrealized gains on equity investments: other income totaled $97,983 млрд. Therefore, when valuing the business, analysts place primary emphasis on trends in revenue, operating profit, the cloud segment, and advertising.

AI supports search and enterprise products

The development of generative AI has not yet disrupted Alphabet’s traditional search model. AI Overviews and AI Mode increase the number of queries and create additional opportunities to display ads. The Gemini app reached 950 млн monthly active users, and its models process 22 млрд API tokens per minute. Gemini Enterprise solutions are used by nearly 90% of Fortune 100 companies.

Previously, Freedom Broker upgraded its recommendation on Alphabet shares from “Hold” to “Buy” and maintained the $400 target price. The new investment idea is based on the acceleration of Google Cloud, TPU monetization, and easing regulatory risks. The main pressure factor remains record spending on AI infrastructure, the payback of which investors have yet to assess.

Not an individual investment recommendation.