Google Parent Alphabet To Gain From Hardware Advances, Gemini Progress, Analyst Sees Rising Cloud Margins

BofA Securities analyst Justin Post reiterated a Buy rating on Alphabet Inc. GOOG GOOGL, with a price forecast of $173.

Google kicked off its annual Cloud Next event with a keynote announcing new custom AI chips (Axion & TPUs), platform-wide Gemini integration, strategic partnerships, and customer traction.

According to the analyst, Google’s hardware advances, Gemini progress, and AI-driven app demos should help sentiment on AI capabilities.

Apart from this, Google’s hardware advances, Gemini progress, and AI-driven app demos should help sentiment on AI capabilities, the analyst adds.

Post writes that the Cloud AI cycle could be underappreciated for the industry and a positive driver for Google stock given the growing scale & potential contributor to higher overall revenue growth.

In addition, increasing cloud margins aiding EPS and growing stock valuation contribution on ’26 revenues can be positive drivers for Google stock.

The analyst specifically highlighted the new custom Axion AI chip (CPUs) in partnership with Arm Holdings Plc ARM that provides 30% better performance & 60% better energy-efficiency.

For Workspace, Google launched Google Vids, an AI-powered video creation app that assists with writing, editing & production. 

The company also launched a new AI Meetings & Messaging add-on, priced at $10/user/month, which includes features like ‘Take notes for me’ (in preview) & ‘Translate for me’ (expected to launch in June) with support for 69 languages.

Overall, the analyst sees Alphabet as well positioned in the long term with leading AI technology to apply to search, YouTube, and cloud businesses.

Alphabet should also benefit from increasing mobile usage, video usage, Google Play activity, and connected device activity (including autos), the analyst adds.

Alphabet should trade at a premium to a media peer group given technology leadership, high margins, and strong cash flow generation for buybacks.

Price Action: GOOG shares are trading lower by 0.30% to $157.66 on the last check Wednesday.

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