Takeaways:
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Bank of America reiterated a Buy on Google while resetting forecasts higher after Q4 earnings.
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The $370 price target implies modest upside, reflecting conservative multiple assumptions.
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Heavy AI-driven capex remains the key near-term pressure point for valuation sentiment.
BofA Adjusts the Numbers, Not the Thesis
Bank of America did not flinch after Alphabet reported its Q4 2025 earnings, but it did recalibrate its model. In a post-earnings note, the bank reaffirmed its Buy rating on Google stock while holding its price target at $370, even as it lifted revenue and earnings forecasts across the out-years.
With shares trading around $331, the target points to roughly 12% upside. That may look restrained compared with peers, but it reflects a deliberate choice by BofA to embed more cautious valuation assumptions rather than a loss of confidence in the underlying business.
Forecasts Move Higher as AI Momentum Builds
Following the quarter, BofA raised its 2026 net revenue estimate by 2% and lifted 2026 EPS by 1%. The longer-term view also improved, with 2027 EPS increased to $12.92 from $12.63 and 2028 estimates moving higher as well. These revisions acknowledge accelerating engagement in Search and continued strength in Google Cloud, both of which were standout features of the quarter.
The earnings reset signals that Alphabet’s core engine is still firing, even as the company leans aggressively into AI infrastructure.
Valuation Discipline in a Compressing Multiple Environment
Despite the higher earnings outlook, BofA trimmed its valuation multiple to 27x from 28x. The move reflects broader multiple compression across Big Tech rather than company-specific deterioration. In effect, the bank chose to balance better fundamentals with a tougher market backdrop, particularly as investors reassess how much they are willing to pay for long-duration growth stories.
This explains why BofA’s $370 target now sits at the conservative end of Wall Street’s range, even as its earnings forecasts rise.
Capex Shock Weighs on Near-Term Sentiment
The timing of the note coincided with a sharp market reaction to Alphabet’s FY26 capital expenditure guidance of $175 billion to $185 billion. That outlook triggered a sell-off of more than 5% in the stock, wiping out close to $170 billion in market value in the immediate aftermath, according to Investopedia.
The pullback also reflects a broader reset across mega-cap technology. Data cited by The Kobeissi Letter shows the so-called Magnificent Seven have shed roughly $3 trillion in market value from their highs, underscoring how sensitive sentiment has become to spending intensity and returns on AI investment.
Diverging Views Across Wall Street
While BofA has taken a measured stance, other firms remain far more aggressive. Targets from Canaccord, Evercore ISI, Goldman Sachs, Needham and JPMorgan cluster between $395 and $415, implying upside of roughly 20% or more. Those views lean heavily on Alphabet’s position as one of the most durable and monetizable AI platforms in the market.
Even with elevated capex, BofA analysts acknowledged that the quarter reinforced Google’s standing as a long-term AI beneficiary rather than undermining it.
How Investors Are Likely to Read It
BofA’s reset is best understood as an exercise in discipline, not doubt. Higher earnings power is being offset by more conservative valuation assumptions as markets digest the cost of building AI at scale. For investors, the tension now sits between near-term cash flow pressure and long-term strategic dominance in search, cloud and AI-driven services.
For a confidential discussion on how large-cap technology valuations, AI-related capital intensity, and portfolio exposure to mega-cap growth leaders can be assessed within a global allocation framework, contact our senior advisory team.
