Over the past few months, Alphabet (NASDAQ:GOOGL) stock has brushed aside concerns that the rise of AI will negatively impact its core Search business, with tools like AI Overviews (AIO) and a browser AI Mode strengthening its search position.
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Investors have evidently warmed to the notion the tech giant will remain a key player in the new AI-led paradigm, given the stock has gained 64% over the past 6 months.
Now, with the company slated to release Q3 results on October 29, Roth’s Rohit Kulkarni, an analyst ranked among the top 3% of Street stock experts, has been looking into the big issues investors are focused on.
Of course, the direction of the Search business is top of the list and while the company’s AI positioning is currently seen in a more favorable light, Kulkarni thinks Search is now “entering a period of incremental volatility.” Over the past 90 days, OpenAI has been “unusually active,” releasing a steady stream of product and partnership announcements, likely preparing for an ads rollout in 2026. If Amazon’s decision to pause Google ads for a thirty-day period (as it did in July) is any indication of what comes next, Search has a “bumpy road ahead.” While Google’s AI Overviews earn similar revenue to traditional search, they generate fewer searches and clicks, relying on higher CPCs. And right now, AI Mode remains experimental, although GOOGL has added tools like an agentic toolkit to encourage more efficient queries and usage beyond standard search and business listings.
The Search business might be facing a challenging period, but Kulkarni sees plenty to be buoyed about in Google Cloud. GOOGL and META signed a six-year cloud contract worth over $10 billion in August, as AI compute needs and demand for capacity continue to outpace advances in leading AI lab models. GCP’s growth in Q2 was fueled by larger deal sizes and a rising trajectory in enterprise AI workloads. “We think building on top of Gemini provides these enterprises further incentive to choose GCP in both experimental and scaled AI-based cloud spend, and optionality in GPU and TPU infrastructure may allow for improved compute efficiency both in training and inference,” Kulkarni said on the matter.
Kulkarni also thinks upward revisions to CapEx are coming. As he noted in a late-August analysis of the AI CapEx race, the analyst finds it surprising consensus expects CapEx intensity and Mega Cap reinvestment capacity to peak in 2026. GOOGL already raised its 2025 CapEx guidance from $74 billion to $85 billion in Q2, and Kulkarni expects that “story to continue” as LLM usage expands, AI cloud demand hasn’t displayed any signs of slowing down, and visibility into 2026–2027 supply continues to improve.
So, what does all of this ultimately mean for investors? Kulkarni maintained a Buy rating on the shares, backed by a $265 price target. This suggests the stock will climb a modest 4% higher over the one-year timeframe. (To watch Kulkarni’s track record, click here)
Of the 37 analysts to have reviewed GOOGL’s prospects during the past 3 months, 29 implore to Buy, while 8 say Hold, all culminating in a Strong Buy consensus rating. However, the $258.6 average target implies shares will stay rangebound for the time being. It will be interesting to see whether analysts boost their price targets or downgrade their ratings shortly. (See Alphabet stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.