Wells Fargo Upgrades Alphabet on AI and Cloud Growth
Analyst Upgrade Details
Wells Fargo analyst Ken Gawlrelski has raised the price target for Alphabet (GOOG/GOOGL) to $397, representing a 44.90% upside from current market rates. The firm maintains an “Overweight” rating on the stock, driven by significant momentum in Google Cloud revenue and strategic AI initiatives.
Financial Performance
Alphabet recently reported fourth-quarter results showing record revenue of $113.8 billion, an 18% year-over-year increase. The company surpassed the annual $400 billion revenue mark for the first time. Non-GAAP earnings per share (EPS) reached $2.82, beating Wall Street estimates by 31%.
Google Cloud was a standout performer with a 48% revenue surge to $17.7 billion and an operating margin of 30.1%. Core segments generated $95.9 billion in revenue, led by Search which rose 17%, while YouTube exceeded $60 billion in combined annual advertising and subscription revenue.
AI Strategy and Infrastructure
The company is pivoting to an AI-first strategy with the integration of its Gemini 3 model. Gemini has crossed 750 million monthly active users, and the cloud backlog doubled to $240 billion. Looking forward, Alphabet anticipates CapEx between $175 billion and $185 billion for infrastructure expansion. Management notes this heavy spending will impact short-term profitability but supports long-term growth.
Key Catalysts
Wells Fargo identified two primary catalysts for the outlook: 1. TPU Licensing Deal: A lucrative agreement with Broadcom (AVGO) is estimated to generate $7.5 billion in revenue by 2027, based on a high-margin licensing fee of $2,500 per TPU. 2. Wiz Acquisition: The strategic purchase of Wiz is expected to enhance Google’s cloud platform through improved cybersecurity efficiency.
Analysts project a 4% jump in cloud revenue for 2026 and another 7% increase in 2027. Wells Fargo raised its 2027 EPS estimate to $14.42, characterizing these deals as transitory expenditures leading to permanent profit centers.
Market Consensus
Alphabet remains a top-tier AI pick with a consensus “Strong Buy” rating across Wall Street. The mean price target stands at $379.21, implying 38% upside potential. Out of 54 analysts covering the stock, 46 issued Strong Buy ratings, three Moderate Buy, and five Hold.
Context
The broader market has seen volatility, yet Alphabet remains one of the most attractively valued “Magnificent Seven” stocks despite recent corrections. While the S&P 500 Telecommunications Index gained 30% in 2025, Alphabet outperformed with a 63% gain, anchored by its massive weighting within the sector.
Takeaway
Alphabet’s stock is supported by robust cloud growth and high-margin AI licensing opportunities. The Wells Fargo upgrade highlights confidence in Google's ability to monetize infrastructure investments through partnerships like Broadcom and acquisitions like Wiz, positioning the company for sustained long-term earnings expansion despite near-term CapEx pressures.
Original source
2 Reasons Why Wells Fargo Thinks You Should Buy Google Stock Now
Published: Mar 31, 2026
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