JPMorgan Keeps Alphabet at Overweight Despite Focus List Exit, Flagging Slower AI Search Monetization

JPMorgan has removed Alphabet from its Analyst Focus List, though the bank left its Overweight rating and $375 price target untouched. The shift concerns the stock's membership on the bank's curated pick list rather than the recommendation itself, and JPMorgan now favors Amazon and Meta within the internet sector.

The reasons behind the move point to the heart of Alphabet's current investment case: AI search is monetizing more slowly than usage is growing, and infrastructure spending is climbing fast. JPMorgan analysts expect improvements in AI search monetization to take time, with so-called bridge-compute contracts set to weigh on margins over the coming quarters. The caution centers on near-term earnings power, while the longer-term view stays constructive — a stronger endorsement of the shares would require the economic returns from Alphabet's AI offerings to keep pace with their adoption.

Search Growth Outpaces the Revenue It Generates

Google's search revenue grew 12% in the third quarter of 2026, a period in which the company recorded its strongest growth in search queries in five years. In JPMorgan's assessment, the AI mode is monetizing weakly. That combination explains the more measured stance on the core business: heavier search activity supports the growth story only if Google converts it into additional advertising revenue. JPMorgan sees a more favorable setup at Meta and expects its Family of Apps advertising revenue to outpace Google Search in the current quarter.

Cloud offers the counterweight. Google Cloud generated revenue of $30.71 billion in the third quarter of 2026, up 103% year over year, with sales of TPU systems contributing significantly according to Alphabet. That momentum supports the stock provided Alphabet can translate growth into stronger cash flows — JPMorgan expects margin pressure to persist at least through the first quarter of next year.

A Quarter of Expansion and Heavy Outlays

Alphabet reported revenue of $127.6 billion for the third quarter on October 28, growth of 25% compared with the prior year, according to company figures. Capital expenditures came in at $51.4 billion, and free cash flow was negative at minus $9.1 billion — the second consecutive quarter in which that metric finished below zero. Management has guided toward significantly higher investments next year.

For 2026, Alphabet is holding to its capital spending forecast of $195–205 billion. Set against that is a Google Cloud order backlog of $561 billion, and management expects to convert slightly more than 55% of it into revenue within 24 months — a strong signal of contractually secured demand, contingent on Alphabet delivering the agreed services.

Qualcomm Stake, Buyout Offers and an EU Copyright Warning

In a filing on Friday, Alphabet disclosed a stake in Qualcomm worth $547.9 million, according to Reuters. The figure reflects the holding as of the end of the third quarter rather than a purchase explicitly reported for that day.

Google confirmed on Wednesday that it had widened voluntary severance offers to Canada, France, Germany, Japan and Switzerland, Reuters reported, noting that the company began making such offers in June.

Separately, a adviser to the European Union's highest court flagged potential copyright violations in Google's Gemini chatbot. Reuters reported on November 3 that the use of press articles in the chatbot's responses could, under certain circumstances, breach the relevant rules.

Taken together, JPMorgan's decision captures the central trade-off facing investors: Alphabet pairs robust cloud growth with a large contracted pipeline, but a more compelling near-term case depends on better monetization of AI search and lighter pressure from its spending program on margins and free cash flow.