This Analyst Just Called Alphabet 2027’s Best Stock. She Might Be Right
Wolfe Research just made a bold call that Alphabet will be the stock of 2027, and the argument rests on something most AI investors have overlooked entirely about how Google is quietly positioning itself across the entire AI economy.
The artificial intelligence boom is entering a different phase. The early winners sold the picks and shovels, but the next leg of the cycle will depend on who can turn enormous AI spending into recurring revenue. That makes 2027 especially interesting.
Alphabet‘s (NASDAQ:GOOG | GOOG Price Prediction) latest results show why. The company is no longer simply buying AI infrastructure from others and hoping its software catches up. It is designing chips, building data centers, developing models, selling cloud services, and distributing AI through products used by billions of people. That vertical integration could become one of its biggest competitive advantages.
Wall Street Sees a Bigger Cloud Opportunity
Wolfe Research has named Alphabet one of its top picks for 2027, and the numbers explain the enthusiasm. Analyst Shweta Khajuria expects Google Cloud Platform revenue growth of 125% in the third quarter, compared with an 87% consensus estimate. Wolfe also raised its 2027 Alphabet revenue forecast 10% to $595 billion and its earnings-per-share estimate 6% to $15.89.
Those estimates build on a business already accelerating. Alphabet’s second-quarter earnings release showed Google Cloud revenue jumped 82% year over year to $24.8 billion, while its backlog reached $514 billion. Cloud operating margin also expanded to 35.6% from 20.7% a year earlier.
To put that in perspective, cloud is no longer a side business supporting Google’s advertising empire. It is becoming an increasingly important engine for monetizing AI.
Google Is Owning the AI Stack
The more interesting story is how Alphabet gets there. Most companies participating in AI own only pieces of the stack. Alphabet increasingly owns the whole thing.
It designs its own Tensor Processing Units (TPUs), which power Gemini and are now being sold directly into customers’ data centers. Alphabet began recognizing revenue from those external TPU systems in the second quarter, with most of the revenue expected to arrive in 2027. One industry forecast projects TPU shipments could triple from 2.76 million units in 2024 to 8.8 million in 2027.
Then comes the software. Alphabet’s model APIs were processing approximately 22 billion tokens per minute in the second quarter, up from 16 billion just three months earlier. More than 9 million developers were using its models each month, while 950 million people were active on the Gemini app.
That creates a powerful loop: Alphabet builds the chips, uses them to train and run its models, sells the computing capacity through Cloud, and then monetizes those models through enterprise software and consumer products.
In short, Google is not merely participating in the AI economy. It is building much of the machinery that powers it.
The Cost of Winning Is Still High
Granted, vertical integration does not make Alphabet immune to AI’s biggest risk: spending.
Alphabet expects 2026 capital expenditures of $195 billion to $205 billion, while Wolfe estimates 2027 spending could reach $330 billion. The company also generated negative $5.9 billion of free cash flow in the second quarter as infrastructure investment accelerated. That is a lot of money to spend before investors see the payoff.
But there is an important offset. Google’s $514 billion Cloud backlog provides evidence that at least some of this infrastructure is being built against real customer demand rather than speculative capacity. And selling TPUs outside Google’s own data centers creates another revenue stream from infrastructure that previously benefited Alphabet primarily through internal cost savings.
Alphabet’s stock also isn’t priced like an early-stage AI company. Wolfe’s $460 price target represents a substantial premium to its current price, while its latest 2027 earnings forecast implies the potential for meaningful earnings growth to accompany the AI investment cycle.
Key Takeaway
Wolfe may be early in calling Alphabet 2027’s best stock, but the thesis is becoming easier to understand.
Alphabet has Search and YouTube generating enormous cash flows, Cloud growing 82%, Gemini processing 22 billion tokens per minute, and TPUs moving from an internal advantage to an external product. Alphabet can monetize AI at multiple layers instead of depending on a single application or chip.
There are no guarantees that $330 billion of annual capital spending will earn attractive returns. That said, the evidence increasingly suggests Alphabet has something many AI competitors lack: control of the stack from silicon to software to distribution.
For investors looking beyond the next quarter, that could make GOOGL one of the most compelling AI bets heading into 2027.
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After two decades of patrolling the dark corners of suburbia as a police officer, Rich Duprey hung up his badge and gun to begin writing full time about stocks and investing. For the past 20 years he’s been cruising the markets looking for companies to lock up as long-term holdings in a portfolio while writing extensively on the broad sectors of consumer goods, technology, and industrials. Because his experience isn’t from the typical financial analyst track, Rich is able to break down complex topics into understandable and useful action points for the average investor. His writings have appeared on The Motley Fool, InvestorPlace, Yahoo! Finance, and Money Morning. He has been featured in both U.S. and international publications, including MarketWatch, Financial Times, Forbes, Fast Company, and USA Today.
