Bank of America has reiterated its “Buy” rating on Google’s parent company Alphabet Inc (NASDAQ:GOOG) ahead of the company’s first quarter earnings report on April 29, highlighting artificial intelligence integration and resilient search demand as key drivers of near-term stock performance.
The bank expects Alphabet to report first-quarter revenue of $92 billion and earnings per share of $2.69, modestly above consensus estimates of $91.7 billion and $2.66.
The analysts believe the rollout of Gemini across core products is likely supporting both search and cloud performance, with checks indicating that search growth may have accelerated during the quarter amid a healthy e-commerce backdrop. Search and related advertising revenue is expected to grow around 18%, broadly in line with Bank of America’s estimates but ahead of broader market expectations.
Cloud remains another area of focus, with growth projected to accelerate by one percentage point quarter-over-quarter to 49%. The firm also sees potential upside in cloud margins, supported by increasing scale and AI-driven demand. Overall operating margin is expected to expand by roughly 45 basis points year-over-year to 40.5%, as gains in cloud profitability offset some pressure in core segments.
Bank of America also lifted its forecast for other income to $2.2 billion, citing possible valuation gains from investments including AI firm Anthropic, which could contribute to earnings upside.
With a first quarter beat largely anticipated, the analysts noted investor focus will shift quickly to second-quarter guidance and relative performance against peers such as Meta Platforms and Microsoft, which are also reporting around the same time.
Bank of America forecasts Q2 revenue of $98.3 billion and earnings per share of $2.80, above consensus estimates, with advertising growth of 16% and cloud growth of 48%. While ad growth is expected to trail Meta, cloud performance could compare favorably with Microsoft’s Azure business.
The recent closing of the Wiz acquisition in March is expected to contribute between $300 million and $400 million to Q2 cloud revenue. At the same time, capital expenditure remains a key area of scrutiny. Alphabet is expected to reiterate its 2026 capex outlook of $175 billion to $185 billion, though the analysts see risk to the upside given rising infrastructure costs and continued investment in AI, including partnerships with companies like Anthropic.
Potential positives from the earnings call include stronger-than-expected search performance driven by increasing AI usage and improved monetization, as well as continued cloud outperformance supported by Gemini and custom tensor processing units.
The analysts also pointed to the possibility of AI-driven efficiency gains supporting operating expense leverage. However, risks include search results coming in merely in line with expectations, commentary pointing to growing margin pressure from capacity expansion, and any increase in capital expenditure guidance. Unexpected cost items could also weigh on sentiment.
Bank of America maintained a constructive longer-term view, arguing that Alphabet remains well-positioned to deliver above-average growth given its AI capabilities across foundational models, proprietary hardware, and global distribution.
Continued improvements in search driven by Gemini integration are expected to support both usage and monetization over time, while cloud margins could expand further as the business scales.
Risks cited include elevated valuation relative to historical levels, potential deceleration in advertising growth in the second quarter, and intensifying competition in large language models.
Shares of Alphabet traded hands at $338 on Thursday afternoon.