Alphabet reported earnings on July 22 and the stock dropped more than 7% in a single session. The numbers weren’t bad. Cloud grew 82% year over year. Advertising held up. EPS beat. What rattled investors was the spending. Capital expenditure guidance for 2026 came in at $195 billion to $205 billion. Free cash flow went negative for the first time in the company’s history. The market looked at that bill and sold first, asked questions later.
Five days later, Phillip Securities analyst Serena Lim Yi Qi published a note saying the market got it wrong. On July 27, she upgraded Alphabet to Buy from Accumulate, lowered her price target to $425 from $450, and explained why the combination of those two moves makes sense.
Phillip Securities upgrades Google stock to Buy on AI growth
The upgrade from Accumulate to Buy is the meaningful part of the call. Phillip Securities is saying Alphabet’s AI momentum has reached the point where sitting on the sidelines no longer makes sense, according to Investing.com.
Lim Yi Qi pointed to Alphabet’s vertically integrated AI ecosystem as the core of the bull case. The company controls its own custom silicon through its Tensor Processing Units, runs optimized data centers, and deploys its Gemini models across Search, Cloud, and its broader product suite. That integration, in her view, gives Alphabet a structural advantage that is starting to show up in the numbers in a meaningful way.
The free cash flow picture is more complicated. Alphabet turned negative on free cash flow for the first time this quarter because of the scale of its AI investment. Lim Yi Qi views that as a temporary condition supporting stronger long-term growth rather than a structural problem. The company has also raised its 2026 capex guidance to a range of $195 billion to $205 billion, signaling the buildout is far from over.
Why Phillip Securities cut the Google stock price target to $425
Cutting the target while upgrading the rating isn’t contradictory. It reflects a specific view: Phillip Securities likes where Alphabet is going more than it did before, but it’s also more disciplined about how much it’s willing to pay to get there.
Lim Yi Qi lowered her fiscal 2026 revenue and net income forecasts by approximately 2% and 4%, respectively. The revisions reflect moderate margin expansion amid ongoing supply chain constraints on AI hardware. The near-term earnings power looks slightly weaker than she previously modeled. The long-term direction looks better. The price target reflects both.
At $319.74, Alphabet is trading at a P/E of 16.04 and a PEG ratio of just 0.14, according to TipRanks. A PEG ratio below 1.0 typically signals a stock is cheap relative to its growth rate. At 0.14, Alphabet is exceptionally cheap by that measure, which is part of why Phillip Securities thinks the upgrade is justified even with a lower target.
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What Google cloud and advertising growth say about Alphabet’s AI momentum
The 82% year-over-year cloud growth is the headline number. It reflects surging demand for Google Cloud’s enterprise AI products and services as companies scale their AI workloads. That kind of growth rate from a business already generating tens of billions in annual revenue is unusual and it’s the clearest sign that Alphabet’s AI investment is converting into real customer demand.
Advertising held up better than many expected. Revenue grew 14% year over year, driven by Gemini integration making Search more useful and increased monetization of Shorts and connected TV. For a business that skeptics have spent years worrying about as AI disrupted traditional search behavior, a 14% growth rate signals those fears may be overstated for now, as TheStreet reported.
Alphabet’s Barclays analyst maintained an Overweight rating and a $425 target citing the company’s new TPU-as-a-service model, which involves selling Tensor Processing Units directly to customers. That business is seeing purchase commitments rise significantly based on Alphabet’s latest 10-Q filing. Citizens also maintained a Market Outperform rating with a $515 target, one of the most bullish on the Street, emphasizing AI growth potential, as TheStreet reported.
What Phillip Securities’ Google stock upgrade means for Alphabet investors
Phillip Securities’ timing matters. Upgrading five days after a 7% earnings selloff says the firm looked at the same numbers that rattled investors and reached a different conclusion. The post-earnings drop gave the stock a valuation that Lim Yi Qi clearly thinks doesn’t reflect what the business is actually doing.
Not every analyst sees it the same way. Bernstein SocGen lowered its price target to $385 and maintained a Market Perform rating, citing the negative free cash flow quarter and the scale of the capex guidance raise. The $195 billion to $205 billion capex range is a significant commitment, and some analysts are less willing than Phillip Securities to take the long-term view on when that investment starts generating proportional returns.
At $319.74 with a $425 Phillip Securities target and cloud growing at 82%, the bull case for Alphabet is real. The question is whether the market is ready to reward a company spending at this scale before the margins fully recover.
Related: Bank of America doubles down on Google stock ahead of earnings
