Mizuho Financial Group has raised its price target for Alphabet to $460, anticipating significant growth from its Google Cloud and Tensor Processing Unit (TPU) businesses. The investment bank believes these segments are undervalued by analysts, projecting Google Cloud revenue to grow 70% by 2026, exceeding current estimates.
This optimism is supported by cloud backlog data and hardware sales estimates, with TPUs expected to generate margins similar to traditional compute rentals. The upgrade reflects a broader positive sentiment on Wall Street, with a majority of analysts rating Alphabet as a ‘buy’.
Mizuho Boosts Alphabet Price Target, Citing Undervalued Google Cloud and TPU Growth
By Michael Bloom
Google's parent company, Alphabet, is set for significant gains driven by its burgeoning cloud and chip businesses, areas that analysts at Mizuho Financial Group believe are consistently underestimated in their profit potential. Mizuho has reaffirmed its 'outperform' rating on Alphabet and raised its 12-month price target for the stock from $420 to $460, suggesting an 18% upside from recent closing prices.
Alphabet's growth is expected to be fueled by its cloud and AI hardware divisions.
Analyst Lloyd Walmsley highlighted that current consensus estimates significantly under-model the revenue and operating income potential of Google Cloud over the next two years. Mizuho's own analysis, based on recent cloud backlog data and supply chain hardware sales estimates, indicates that the Cloud segment's revenue and operating income are poised to significantly exceed current market expectations.
Mizuho forecasts Google Cloud revenue to grow by 70% year-over-year by the end of 2026, surpassing the consensus estimate of a 58% increase. Furthermore, Walmsley pointed out that Alphabet's hardware sales, including its Tensor Processing Units (TPUs) essential for AI applications, can achieve profit margins comparable to the traditional compute rental business.
This optimistic outlook from Mizuho aligns with broader Wall Street sentiment. Data from LSEG reveals that out of 61 analysts covering Alphabet, 53 hold a 'buy' or 'strong buy' rating. The company's stock has already seen a substantial increase, climbing more than 29% in the past month.
Related Analyst Calls
Other significant analyst calls from Wednesday include updates on Nvidia, AMD, Palantir, Monster Beverage, Meta, and Sphere Entertainment.
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