Alphabet Inc. (NASDAQ:GOOGL) closed 2025 with a quarter that reinforced its position as the most deeply integrated AI platform across consumer and enterprise computing, according to Goldman Sachs.

In a note shared on Thursday, the firm analyst Eric Sheridan lifted Alphabet’s 12-month price target to $400, up from $375, citing accelerating growth in Google Cloud, a rebound in search, and disciplined investment amid the AI race.

That still implies a 20% upside compared to Wednesday’s closing price.

“This quarterly report continued a trend that started in late summer 2025 with Alphabet demonstrating continued operating momentum in its core business while scaling its consumer and enterprise AI efforts,” Sheridan wrote.

Google Cloud: The $70 Billion Run Rate Machine

The brightest spot in Alphabet's Q4 was its Cloud division, which saw revenue grow 48% year over year, blowing past Goldman's own estimate of 40%.

The backlog swelled to $240 billion, up 158% from a year earlier and 55% sequentially, supported by record enterprise AI demand.

Goldman said more $1 billion+ deals were signed in 2025 than in the previous three years combined.

YouTube Ads Missed, Subscriptions Didn't

YouTube advertising revenue grew 9% year over year. That figure missed Goldman's estimate and decelerated from the prior quarter.

Goldman attributed the slowdown to tough comparisons from political advertising in late 2024 and a shift toward paid subscriptions. Management framed that mix shift as positive for consolidated revenue.

Subscriptions, Platforms and Devices revenue rose 17% year over year. Alphabet ended 2025 with more than 325 million paid subscriptions across consumer services.

Beyond the core segments, Alphabet confirmed it led a recent funding round at Waymo, signaling renewed urgency around commercializing autonomous driving. At the same time, management continued to balance margins with growth: both Services and Cloud operating income came in ahead of estimates despite sharply higher capital spending.

Capex Surge Signals Long-Term AI Ambitions

Alphabet is guiding for $175 billion to $185 billion in capital expenditures in 2026, nearly double the previous year's total.

According to Goldman Sachs, this reflects continued investment in AI infrastructure, with 60% of capex allocated to servers and 40% to data centers.

Although acknowledging investor concerns around capex, the investment bank views the spending as long-tailed and strategically necessary.

“Alphabet has climbed a steep wall of worry in the past 12 months around the AI theme,” Sheridan said.

Even with this investment ramp, Alphabet is expected to remain free-cash-flow positive, a rare combination at this scale.

“We don't see any reasons to suspect a pause or step back in terms of its operating proof points that would change investor perception over the near term,” he added. 

Goldman said that Alphabet’s management still expects a supply-demand imbalance for AI capacity by year-end.

The firm now expects 2026 revenue of $472.2 billion, up from its prior estimate of $456.1 billion. It forecasts 2026 GAAP earnings per share of $10.66.

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