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 ****** yst 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.
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.
#free #flow #first #cloud
Five days later, Phillip Securities ****** yst 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.
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.
#free #flow #first #cloud
2 months ago
