Goldman Sachs stated that with its &#34;full-stack AI&#34; layout, from underlying models and cloud infrastructure to end-user applications, this tech giant is transforming its technological advantages into tangible financial returns, maintaining a buy rating and raising the target price to $330.
On October 31, according to Hard AI news, Goldman Sachs mentioned in its latest research report that Alphabet showcased the competitive advantages of its &#34;full-stack AI&#34; layout in its third-quarter earnings report. Analyst Eric Sheridan pointed out that from the development of underlying models, cloud computing infrastructure to consumer and enterprise applications, Google has positioned itself at various stages of the AI industry chain, and this vertical integration capability is being converted into actual financial returns.
According to a previous article from Wall Street Insight, Alphabet's total revenue in the third quarter surpassed $100 billion for the first time, with paid clicks and cost per click in the search business both increasing by 7% year-on-year, YouTube ad revenue growing by 15% exceeding expectations, while Google Cloud's 34% year-on-year growth rate and 23% operating profit margin became the highlights of this earnings report. Goldman Sachs stated that management made positive comments on the competitive positioning of AI-driven workloads during the earnings call, showing confidence in long-term growth prospects.
At the same time, the company raised its 2025 capital expenditure guidance from approximately $85 billion to a range of $91 billion to $93 billion. Goldman Sachs correspondingly adjusted its capital expenditure expectation for 2026 to approximately $122 billion, a year-on-year increase of 32%, reflecting Google's continued heavy investment in AI infrastructure.
Goldman Sachs emphasized that although the macroeconomic environment and digital advertising demand remain focal points for the market, Google has overcome multiple doubts surrounding AI themes in the past 12 months, and management has shown an extremely positive attitude towards the scaling of consumer and enterprise adoption of its AI solutions. In summary, Goldman Sachs maintains a buy rating on Alphabet and raises the 12-month target price from $288 to $330.
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<h2>Core Business Growth Across the Board, Cloud Computing as the Biggest Highlight</h2>
The research report stated that in the third quarter, all core businesses of Alphabet demonstrated strong growth momentum. Revenue from search and other businesses increased by 15% year-on-year, and management disclosed for the first time that both paid click volume and cost per click (CPC) increased by 7% year-on-year, showing broad growth strength across verticals. This dual growth alleviated market concerns that new AI-driven search forms might erode the profitability of traditional search.
YouTube's composite business (advertising + subscriptions) maintained its growth momentum, with ad revenue increasing by 15% year-on-year, better than expected. Management particularly emphasized the increasing contribution of subscription services, disclosing that the total number of subscription users across all services has exceeded 300 million, with YouTube Music and Premium subscription users having a gross profit margin higher than that of ad users
Google Cloud's performance stands out, and Goldman Sachs considers it the core highlight of this earnings report. The department's revenue grew by 34% year-on-year, with revenue backlog increasing by 79% to $155 billion, and an operating profit margin of 23%. Management revealed that the number of large orders exceeding $1 billion signed in the first three quarters of this year has surpassed the total of the past two years, indicating strong growth in enterprise AI demand.
<h2>Capital expenditures significantly raised, infrastructure investment increased</h2>
The company raised its 2025 capital expenditure guidance from approximately $85 billion to $91-93 billion, a significant increase. Management stated that these investments will be allocated to servers (60%) and data centers (40%), focusing on ongoing infrastructure development. Although management has not provided guidance for 2026 capital expenditures, Goldman Sachs has raised its expectations to approximately $122 billion, a year-on-year increase of 32%.
Goldman Sachs stated that the surge in capital expenditures will have a dual impact on the financial statements. Depreciation expenses in the third quarter increased by 41% year-on-year to $1.6 billion, and management expects a slight acceleration in the fourth quarter, reflecting the ongoing pressure of high infrastructure investments on the profit and loss statement. Goldman Sachs expects the company's capital intensity to remain high in 2026 before gradually declining.
Despite the expansion in investment scale, the company is still balancing operational efficiency with growth investments, maintaining a standardized upward trajectory in profit margins. The GAAP operating profit margin for the third quarter was 35.7%, with the annual operating profit margin expected to remain around 38%, and further improvements anticipated to 39.5% and 39.6% in 2026 and 2027, respectively.
<h2>AI application scaling shows comprehensive penetration from search to enterprise</h2>
Goldman Sachs particularly emphasized that management has a very positive attitude towards the scaling of AI solutions for both consumers and enterprises. In the earnings call, management cited multiple scaling cases across traditional search, AI Overviews, Gemini, and various AI model query formats, demonstrating that AI is comprehensively reshaping Google's product experience.
Goldman Sachs believes that Google will successfully respond to the evolution of search products in the coming years, with core advantages including: a large existing user base, accelerated product innovation pace, scale of technological infrastructure, and a cost advantage relative to competitors. Analysts at the firm pointed out that the market underestimates Google's dual advantages—both having the capability for large-scale AI distribution (over 1 billion user applications) and the computational scale advantage to drive investment and efficiency improvements.
In the long term, Goldman Sachs remains optimistic about Google's positioning in the current computing environment (global scale applications of desktop and mobile computing) and future computing environment (AI/machine learning, personalization, lowering application usage barriers). As AI monetization evolves from the &#34;infrastructure&#34; layer to the &#34;platform&#34; and &#34;application&#34; layers, the value of this full-stack capability will become more pronounced.
<h2>Ample reserves for long-term growth engines, quantum computing brings additional options</h2>
In addition to the strong performance of its core business and cloud computing, Goldman Sachs also emphasized the long-term upside potential within Alphabet's structure, specifically mentioning the Waymo autonomous driving business and quantum computing projects.
Although these long-term projects have not yet had a significant impact on financial performance, they provide additional options for the company's future growth.**
Goldman Sachs raised its earnings expectations, increasing the 2025 GAAP earnings per share forecast from $9.86 to $10.49, from $10.51 to $10.71 for 2026, and from $11.96 to $12.34 for 2027.
Based on the updated expectations, Alphabet is currently trading at approximately 26.5 times and 23.0 times the GAAP earnings per share expectations (excluding cash) for 2026 and 2027, respectively. The company currently has about $75 billion remaining in its stock repurchase authorization.
Goldman Sachs' target price of $330 is based on an equal weighting of two valuation methods: applying a 22x EV/GAAP EBITDA multiple to the expected EBITDA for the next 12 months plus one year, and applying a 30x multiple to the expected free cash flow minus stock-based compensation (FCF-SBC) for the next 12 months plus four years, discounted at a 12% rate over three years. This target price represents about a 20% upside from the current stock price.

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Goldman Sachs believes that Google has positioned itself across the entire chain of models, cloud, and applications, with the ability to distribute to over 1 billion users and cost advantages, presenting a broad prospect for AI monetization. Google's Q3 financial report shows that revenue has surpassed $100 billion for the first time, with search business growth of 15%, cloud computing revenue up 34%, and a profit margin of 23%, which are the biggest highlights. The firm has raised Google's target price to $330 and maintained a buy rating

- Goldman Sachs reports that Google's "full-stack AI" strategy is translating technological advantages into financial returns, maintaining a buy rating and raising the target price to $330.  
- Alphabet's Q3 revenue surpassed $100 billion, with significant growth in search, YouTube, and cloud services, reflecting strong demand for AI solutions.  
- The company increased its 2025 capital expenditure guidance to $910-930 billion, indicating a continued focus on AI infrastructure and long-term growth potential.

From models, cloud to applications "full-line positioning", Goldman Sachs: Google's "full-stack AI" advantage fully demonstrated