quick read
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Google Cloud has seen impressive growth, with a 63% increase year-over-year and its backlog nearly doubling to $460 billion. Despite this, GOOGL’s stock is trading at just 23 times its projected revenue.
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With Apple incorporating Gemini into Siri and GOOGL’s anticipated returns lagging behind NVIDIA and Microsoft, there are questions around its valuation.
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While reaching $500 per share by 2027 seems likely, it hinges on over 50% growth in the cloud sector and accelerated monetization of Gemini.
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Analysts who predicted NVIDIA’s success back in 2010 have now listed GOOGL among the top AI stocks—though notably, Google didn’t make the cut.
Alphabet (NASDAQ:GOOGL) is currently undergoing its most ambitious AI infrastructure expansion. CEO Sundar Pichai described 2026 as starting off strong, emphasizing that their AI investments and comprehensive approach are benefiting the entire business.
In the first quarter, Google Cloud revenue rose to $20.03 billion, marking a 63% increase year-over-year, while the backlog surged to over $460 billion. The stock has gained 16.22% this year, but can it truly break the $500 barrier?
Why GOOGL fell 9.3% last month
Recently, GOOGL has dropped 3.41% in the past week and 9.3% over the last month, retreating from its 52-week high of $408.37.
This decline appears linked to the announcement of $80 billion earmarked for AI infrastructure, raising fears of potential dilution. Capital spending skyrocketed to $35.67 billion in the first quarter, a staggering 107.44% year-over-year increase. Projections for 2026 suggest capital expenditures could reach between $175 billion and $185 billion. This hefty spending will likely create significant cash outflows before any AI benefits materialize. GOOGL’s volatility is apparent—it tends to move more sharply than the broader market.
Wall Street sees room for 19% upside. In our model it is 24%
Current market consensus values GOOGL at $431.19, supported by 14 strong buy recommendations, 43 buys, 7 holds, and no sells. This reflects an 89% bullish outlook. Our analysis presents a more optimistic $451.23 target, indicating an expected 24.2% upside.
In an optimistic scenario, the stock could rise to $519.92. With Q1 earnings per share above expectations and cloud revenue accelerating, analysts are focusing on historical growth rates. The anticipated 0.82x profit growth year-over-year seems to be underappreciated at the $431 target, suggesting the consensus might be overly conservative.
The road to $500 per share
A 37.6% increase is required to hit $500 from the current $363.31. The forward earnings per share (EPS) is projected at $15.47, meaning a $500 stock price would lead to a forward P/E ratio of 32 times. The baseline estimate of $451.23 suggests a 28 times P/E, which is already fairly ambitious and would emphasize needing an approximate 4.6x multiplier extension.
This kind of growth is plausible as AI monetization picks up speed. Key drivers include Apple’s integration of Gemini into Siri, Anthropic securing $35 billion in funding related to Google’s TPU, and Cathie Wood’s recent addition of about $99 million to her Alphabet holdings. According to Pichai, Gemini is now processing over 16 billion tokens per minute, a 60% increase from the previous quarter. However, the risk remains that increased capital spending could hinder free cash flow, leading to multiple contractions.
Google’s Today’s Accounts and Their Earning Power
GOOGL currently trades at about 23 times forward earnings, with EPS at $363.31 instead of $15.47, which may appear cheap given that cloud revenue is rising at 63% and search revenue at 19%.
The forward P/E is considerably lower at 26 times when compared to peers like NVIDIA and Microsoft. The stock’s down 6% from its 52-week peak of $408.37, but far above its low of $161.54. The long-term return of nearly 900% over the past decade suggests the benefits of compounding.
Is $500 realistic? this is my opinion
To reach $500, we would need a 37.6% gain from here. Frankly, this might seem a bit ambitious, but I believe it’s achievable by 2027.
Three critical factors need to align: cloud growth must stay above 50% annually, Gemini needs to gain traction in monetization, and operating margins should maintain around 36%. Regulatory challenges and skyrocketing capital expenditures could disrupt these plans. Nevertheless, Google appears to have carved out a strategy aimed at reaching $500 by 2027.
