Alphabet Price Target Trimmed By Wells Fargo – But It Sees Cash Flow Turning A Corner

• Wells Fargo lowered Alphabet's price target from $397 to $361 but kept an ‘Overweight’ rating.
• The firm highlighted that the first quarter of 2026 could mark a shift in Alphabet’s free cash flow trajectory.
• A significant portion of expected upside is tied to Google Cloud, which reported $17.7 billion in Q4 revenue.

Alphabet Inc. (GOOGL) stock is in focus on Thursday after Wells Fargo slashed the price target to $361 from $397 while maintaining an ‘Overweight’ rating, pointing to strengthening financial trends despite the lower target. 

The firm’s analysis highlights improving fundamentals, particularly around cash generation and cloud-driven growth.

Improving Cash Flow Outlook

Wells Fargo indicated that the first quarter of 2026 could mark a turning point for Google's parent company’s free cash flow expectations, according to TheFly. The firm added that after a prolonged period of downward pressure, projections are now shifting higher, supported by stabilizing capital expenditures and improved operating performance.

This anticipated improvement reflects stronger execution across key segments, suggesting that Alphabet’s earnings engine remains resilient despite broader market uncertainties.

Alphabet Class A shares traded over 2% lower in Thursday’s premarket. On Stocktwits, retail sentiment around the stock remained in ‘neutral’ territory amid ‘high’ message volume levels. 

Cloud Business Drives Upside

Wells Fargo said a huge portion of the projected gains is tied to non-cyclical drivers, particularly the company’s Google Cloud Platform (GCP). Analysts view the cloud division as a major contributor to future growth and a source of stability.

In the fourth quarter (Q4), Google Cloud reported revenue of $17.7 billion, marking a 48% year-over-year increase, driven by massive demand for AI infrastructure. 

Google Cloud’s contractual backlog has swelled to $240 billion, signaling a strong enterprise demand for Gemini-integrated infrastructure. Alphabet plans to spend between $175 billion and $185 billion on capital expenditure in 2026 alone. To put that in perspective, this is more than double the $91 billion spent in 2025. 

GOOGL stock has declined by over 4% year-to-date. 

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