Alphabet Inc. (GOOGL) heads into its fourth-quarter earnings report with serious momentum. Between surging AI usage and healthy advertising demand, the Google parent company looks set to beat expectations when it reports on Feb. 4, potentially reshaping how investors think about its growth trajectory through 2026.
Bank of America Securities analyst Justin Post raised his forecasts slightly ahead of the report, pointing to a steady ad market and accelerating Gemini-related usage. He maintains a Buy rating on Alphabet with a price target of $370.
Post's logic is straightforward: if Meta Platforms Inc. (META) posted strong results indicating healthy holiday ad spending, then Alphabet should benefit from the same trends. Based on that signal, he bumped his Search growth assumption to roughly 15% from 14%.
The gap between his expectations and consensus estimates is notable. Post thinks Search growth could land around 15%-16% versus Street estimates near 13%, while YouTube growth could run about 14%-15% versus the roughly 13% expected.
The Numbers Behind the Optimism
For the fourth quarter, Post expects revenue of $95.9 billion and EPS of $2.65, both above Street estimates of $95.2 billion and $2.64. He's also forecasting operating expenses of $28.0 billion, up 13% year-over-year, with operating margin expansion of 119 basis points.
One interesting detail: job opening data shows postings down about 7% quarter over quarter, which Post views as evidence of disciplined hiring practices at Alphabet.
But here's what really matters for the stock: first-quarter commentary. Post lifted his first-quarter outlook to roughly $90.1 billion in revenue and $2.56 in EPS, compared to Street expectations near $88.8 billion and $2.54.
The Capex Story
Post also raised his 2026 capex estimate substantially, up 14% to about $139 billion versus Street levels closer to $119 billion. This reflects the massive infrastructure investment happening across the tech sector as companies race to build out AI capabilities.
That increased spending forecast comes with trade-offs. While Post lifted 2026 net revenue about 1% to roughly $400 billion and raised GAAP EPS about 1% to $11.22, he cut his 2026 free cash flow estimate to about $53 billion to account for the heavier capex load (up roughly 50% year-over-year).
Where the Upside Comes From
Post's estimate revisions stem from healthier holiday ad checks and favorable foreign exchange movements. He also lifted his "Other Income" forecast to reflect potential mark-to-market gains from Alphabet's stakes in companies like SpaceX and Anthropic, taking that line to about $1.3 billion from $800 million.
For the fourth quarter, he now expects Search revenue of about $61.9 billion (up 15% year-over-year) and YouTube revenue of about $12.0 billion (up 15% year-over-year), while leaving Cloud estimates unchanged.
For 2026, Post increased operating expenses about 0.4% to approximately $117 billion, balancing growth investments with the disciplined cost management Alphabet has demonstrated recently.
Alphabet shares were down 0.17% at $337.67 at the time of publication on Friday, trading near their 52-week high of $342.29.
