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In many ways, Alphabet (GOOGL) stock investors entered the earnings season looking for proof that AI was strengthening its Search business without forcing another major bump in spending. Though the quarter delivered evidence of robust demand, it wasn’t the confirmation Wall Street was hoping for. For perspective, Alphabet reported its Q2 2026 earnings on July 22, 2026, and Google stock fell 7.1% to $317.69 on Thursday, July 23, wiping nearly $294 billion from its market value, according to MarketWatch reporting. Google Cloud sales jumped 82%, margins expanded sharply, and backlog climbed to $514 billion. However, Alphabet raised 2026 capex guidance to as much as $205 billion, stoking fears that AI returns may arrive more slowly than the bills, as free cash flow turned negative.Nevertheless, Bank of America kept its Buy rating after the quarter, arguing that the market may be overlooking what Alphabet’s spending is already producing. Though Search revenue was roughly in line with expectations, Alphabet’s consolidated operating margin expanded to 34% from 32%, while operating income rose 30%.BofA analysts therefore believed the company had been punished too harshly, as investors overlooked accelerating Cloud growth and other signs that its AI investments are beginning to generate returns.

Bank of America kept its Buy rating on Alphabet after Q2 earningsJustin Sullivan/Getty Images

Alphabet Q2 earnings at a glanceQ2 revenue reached $119.8 billion, while net revenue excluding TAC came in at $103.6 billion, above the $101.1 billion consensus.GAAP EPS was $9.11, compared with Wall Street’s $2.90 estimate.Google Search revenue rose 17% to $63.3 billion, while YouTube advertising revenue increased 13% to $11.1 billion.Google Cloud revenue surged 82% to $24.8 billion, with operating income of $8.8 billion and a 35.6% margin.Alphabet raised 2026 capex guidance to $195 billion–$205 billion, while Q2 free cash flow was negative $5.9 billion.BofA maintained its Buy rating and $430 price target, forecasting $553 billion in 2027 revenue and $15.01 in EPS.
Source: Bank of America post-earnings note on Alphabet stock.
BofA thinks Alphabet’s AI spending is already paying off BofA analysts reiterated their Buy rating and $430 price target on Alphabet stock post-earnings, arguing that there’s a clear mismatch between what investors are viewing and what the quarter actually showed.More AI:Workers just sent AI companies an ultimatumPalantir CEO has a blunt verdict on OpenAI and AnthropicElon Musk pulls no punches with AI rivals as Grok 4.5 debutsThe market was clearly looking at Alphabet bumping its 2026 CapEx guidance to $195 billion to $205 billion, along with negative free cash flows and a greater likelihood of elevated spending in 2027.Those concerns are legitimate, as it’s now forecasting a negative $16 billion of free cash flow in 2026 and another negative $18.5 billion in 2027.However, the bank believes that’s far from a speculative AI investment, where Alphabet is already seeing measurable revenue, margin, and backlog benefits.At the same time, BofA analysts believe Google Cloud is effectively becoming Alphabet’s incremental growth and valuation engine.Cloud sales accelerated 82% year over year to $24.8 billion, compared to the Street’s 65% forecast, while operating margin surged to 35.6%, comfortably above the 31.3% consensus. Typically, with rapid growth, we usually see margin pressure, but Alphabet instead produced faster growth and better profitability, which suggests that AI infrastructure is perhaps generating attractive utilization with stronger pricing.Moreover, the demand indicators are still healthy and point to a capacity-driven CapEx increase. Cloud backlog surged to $514 billion, up $50 billion sequentially; customers are consuming more than 50% above contractual commitments, and Alphabet is winning new Cloud customers at over 2 times last year’s pace.At the same time, Search remains an important supporting pillar. Search revenue grew 17%, which shows that AI products haven’t materially impacted Google’s core advertising engine. However, sales were mostly in line with expectations. which doesn’t exactly validate the thesis that AI Overviews and AI Mode are producing a major Search acceleration. How does BofA arrive at its $430 price target?BofA values Alphabet stock at 27 times the adjusted 2027 core Google GAAP EPS of $15.55. That produces an operating-business value of approximately $419 per share. It then adds $11 per share of estimated year-end 2026 cash, resulting in the $430 target.Interestingly, the bank, in acknowledging the heightened CapEx, weaker cash flow, and AI spending concerns, lowered its target multiple from 28 times to 27 times.However, at the same time, the bank’s analysts raised their 2027 revenue estimate by 3% to $553 billion and consolidated EPS estimate by 2% to $15.01. So in effect, the higher earnings forecast offset the lower multiple, leaving the target unchanged.When the report was released, Google’s stock was trading at anafter-hours price of $332, trading at 22 times BofA’s 2027 GAAP EPS, aligning with its 10-year historical average.BofA considers the stock to be attractively priced, especially with sales expected to ramp up to 27% in 2027, compared to an average of nearly 14% from 2023 through 2025.Additionally, as we saw with SpaceX, BofA’s sum-of-the-parts analysis added a complicated new layer.BofA says that once Alphabet’s faster-growing businesses are valued separately, its core Search advertising and Google Play operations trade at just 13 times earnings, versus 20 times for the S&P 500. That opens up the question for investors, who need to know how much value belongs to mature advertising versus newer AI, cloud, and Waymo assets. What are the weaknesses in BofA’s argument?Perhaps the biggest issue with Alphabet’s predicament is that its profit and loss statement is improving more quickly than the cash flow. Case in point is its negative $5.9 billion in Q2 free cash flow, which constrained its ability to repurchase shares, and its statement that buybacks are unlikely to resume for the rest of 2026. Alphabet also plans a $40 billion at-the-market equity program, which could create dilution precisely when investors are questioning capital discipline.Furthermore, BofA expects capex to rise to $200 billion in 2026 and to roughly $300 billion in 2027. That essentially means the Cloud businesses must continue converting backlog into sales at very high rates while maintaining margins near the mid-30% range.If Cloud growth slows down before depreciation and infrastructure costs peak, Alphabet risks facing simultaneous top-line deceleration, margin compression, and ongoing negative free cash flow.At the same time, there is also an earnings-quality issue. Alphabet’s reported $9.11 EPS, which was heavily influenced by $98 billion of other income, linked to the Anthropic revaluation. That gain doesn’t reflect recurring operational performance, so the headline EPS beat cannot be treated as evidence that the underlying business sped past estimates by a comparable amount.What Alphabet’s AI spending bet means for investors Google CEO Sundar Pichai had a lot to say during the company’s Q2 earnings call, with major implications for investors. Pichai’s comments suggested that Alphabet is deliberately accepting near-term cash flow and margin pressure to secure longer-duration customer economics.He said that he was “more bullish on the opportunities ahead” over the past year, describing AI as a secular shift in which enterprises are still “barely scratching the early stages of what’s possible.” He elaborated on that long-term theme in a discussion on renting third-party capacity. Pichai acknowledged that serving major Cloud customers could carry a “very high” short-term cost, but framed it as accepting a six-month expense to capture a multiyear contract with “very, very attractive” returns. That means Alphabet is looking to optimize for customer lifetime value rather than just quarterly Cloud margins, although investors must trust that internal capacity will eventually replace those expensive leases.Additionally, Pichai also offered a more nuanced view of Google’s AI moat.He said, “The model is just an ingredient” inside larger cybersecurity, data, infrastructure, and agentic workflow solutions. However, Google’s real moat rests on Gemini, TPUs, proprietary infrastructure, enterprise data controls, and distribution into one integrated system.Put simply, investors should expect a lot more quarter-to-quarter shocks in CapEx, free cash flow, and cloud margins as Google races to secure AI capacity. Related: Bank of America targets Nvidia’s next $170 billion growth engine

Recently, I wrote about Redfin data showing that pending home sales were down for the first time in a month.Well, the situation has gotten worse. (Or better, depending on your perspective.)The previous week, weekly pending home sales had decreased by 2.2%. A new Redfin report revealed that week-over-week pending home sales fell again, this time by 1.3% for the four-week period ending July 19.Not only is this the second straight week of declining pending sales, but it’s also the lowest level in three months.The term “pending home sale” means the seller has accepted the buyer’s offer and the listing is no longer active. However, the deal is “pending” because the parties haven’t closed yet.Redfin pointed to several reasons fewer Americans are making offers: rising mortgage rates, economic uncertainty due to the war in Iran, and higher oil prices.Lower pending sales can be tough for the housing market overall. However, this trend can benefit those who still want to buy a house.”Falling pending home sales could be a good sign for buyers, as they may be able to gain more favorable terms on a purchase from sellers with fewer options,” Michael C. Weiner, a real estate agent at Coldwell Banker Warburg, told TheStreet.Fewer pending home sales give homebuyers more powerHow does a dip in pending home sales translate to better deals for homebuyers?”That could take the form of a lower price, more flexibility on closing timing, or increased seller funding of repairs,” said Weiner.When there are fewer buyers in the housing market, there is less competition. This means homebuyers have more power than sellers — it’s a buyer’s market.You may be able to negotiate any of the terms Weiner listed with the seller when making an offer or counteroffer. And when it comes to how much you’ll pay for the home, you might not even need to wait until the negotiation process to see a lower price.If a home stays on the market for too long and the seller wants to appeal to more buyers, they may cut the listing price. The share of property listings with a price cut was 18.8% in June, according to Realtor.com data.Related: Why homebuyers win despite latest mortgage rate newsAlthough mortgage rates are relatively high, homebuyers can snag savings in other areas in this sort of real estate market. That can help lessen the blow of mortgage rates over 6.5%.Don’t get too confident, though. You and your real estate agent still need to be strategic about which home you buy and how to craft a strategic offer.”Buyers should remember that desirable, move-in ready homes can still be competitive because many people don’t want to take on renovation costs while mortgage payments are high,” said Redfin Premier agent Vanessa Leimback. “That’s why the biggest bargains are often on fixer-uppers.”

Fewer pending home sales leads to lower inventory, so a fixer-upper might be your best bet.Westend61 / Getty Images

Redfin and experts note that you might not find your dream homeThe decrease in pending home sales brings plenty of advantages for buyers. But it also introduces unique challenges.”On the flip side, it also might mean that there are simply not a lot of good choices on the market, and that they may not be able to find what they’re looking for,” Weiner told TheStreet.The Redfin study revealed that week-over-week new listings have increased by just 0.4%. This puts new listings at their second-lowest level of 2026.More Housing Market:Is the American starter home officially dead?Boomers have unfair edge over younger homebuyersFannie Mae predicts shift in mortgage rates, housing market”The catch is that new listings are also hovering near their yearly low, so buyers may have more leverage without much more choice,” John Walkup, co-founder at UrbanDigs, told TheStreet. “In practical terms, buyers may be able to secure modest discounts or concessions, while sellers need to stay closely aligned with their direct competition,” he continued.With less inventory, you may struggle to find your dream home. As Leimback mentioned, a fixer-upper could be your key to becoming a homeowner sooner rather than later. Then, you could put any savings from the home purchase toward maintenance projects.What’s next for pending home sales?Now that we’ve covered the pros and cons of declining pending home sales for buyers, you might be wondering where this specific housing market trend is headed.Of course, none of us have a crystal ball to tell us what mortgage rates, pending home sales, or any aspect of the market will do. But after years of reporting on the real estate market, I’ve picked up on a few clues that provide insight.I suspect that next week’s Redfin data will show that pending sales are down again.Why? Because the company cited the Freddie Mac mortgage rate of 6.55%, which was an 11-month high, as one reason behind the lower pending sales numbers. But that was the average 30-year mortgage rate the week ending July 19. Freddie Mac released its updated average rate on July 23 — it increased by 0.03% to 6.58%. This is its highest point in 2026.Higher rates may mean even more would-be homebuyers decide to take a step back.There also aren’t any signs of the U.S.-Iran conflict dying down anytime soon. This political and economic uncertainty could keep Americans from feeling confident about making such a huge purchase.It’s possible that mortgage rates will inch down the following week. But the war in Iran has a potentially longer-lasting impact on the housing market.Related: Homeowners face selling decision after housing market shift

Four of the largest corporations in the United States just signaled that a particular shortage is about to intensify. BlackRock, Ford Motor Company, Google, and Carhartt announced a new coalition on July 21 called the Alliance for America’s Skilled Trades.  Three of the four founding companies have independently committed a combined $450 million to expand workforce training and fund apprenticeship pipelines across 30 states.Carhartt, the fourth member, contributes through its For the Love of Labor program, which has supported more than 60 nonprofit and community organizations focused on trades training since 2022.The announcement lands as the construction sector alone posted 298,000 open positions in May, up 32,000 from the prior month, the Bureau of Labor Statistics reported. The alliance’s founders say skilled trades represent some of the fastest-growing and highest-paying career pathways in the U.S. economy.Ford commits $300 million to skilled trades as the auto industry faces a technician droughtFord is the largest single contributor, with $300 million earmarked for skilled trades workforce development and what the automaker calls its Essential Economy initiative in 2026. The reason for that outsized commitment is visible in Ford’s own dealer network.The U.S. auto industry will need more than 350,000 new technicians by 2029, according to Ford, and CEO Jim Farley has said the automaker alone has roughly 5,000 unfilled dealership service positions with annual wages reaching $120,000 for experienced candidates.”At Ford, we recognize the skilled trades workforce shortage is a national crisis but also a generational opportunity,” Jim Farley said in the alliance announcement.The automaker separately co-invested $5 million with Bloomberg Philanthropies in June to modernize auto technician programs at two Detroit public schools, targeting 300 new technicians over three years.BlackRock and Google target infrastructure and data-center build-outsBlackRock’s contribution comes through its $100 million Future Builders program, launched in March 2026, which aims to connect 50,000 workers with training over five years. Google committed $50 million to prepare more than 300,000 workers across over 20 states for careers tied to energy and technology infrastructure. Both companies are pouring capital into physical infrastructure that requires enormous pools of trained electricians and HVAC technicians. More Google:Alphabet stock rally exposes Google’s unusual AI problemGoogle just took crown Verizon held for 22 yearsGoogle CEO says AI has changed revenue picture completelyElectrician employment alone is projected to expand 9% from 2024 to 2034, triple the national average for all occupations, the Bureau of Labor Statistics reported.”Building the physical infrastructure for America’s future requires significantly increasing the pipeline of skilled tradespeople across the country,” Ruth Porat, president and chief investment officer of Alphabet and Google, said in the announcement.

BlackRock, Google, and Carhartt are investing millions to train skilled workers as demand for electricians and HVAC technicians accelerates nationwide.Bloomberg/Getty Images

The $1 trillion cost of 2.1 million unfilled trade jobs by 2030The labor shortage driving these investments carries a price tag far beyond the companies involved. An estimated 2.1 million skilled trades positions could go unfilled by 2030, according to a JLL research report published in April 2026, with the U.S. Department of Education projecting annual economic losses of up to $1 trillion.Courtney Brown, chief data and research officer at the Lumina Foundation, said bachelor’s programs remain prestigious but two-year schools are winning on cost.A four-year degree is still the gold standard…community colleges are doing really well with affordability and value…more people gravitate towards thatNearly 600,000 skilled trades jobs were posted last year, but only about 150,000 new workers entered through apprenticeship programs, the JLL report noted.Skilled trades wages sit above the median for all occupationsThe financial case for entering the trades has shifted over the past decade, with skilled-trades job postings growing three times faster than professional roles between 2022 and 2026, according to a Randstad USA analysis of more than 150 million U.S. job postings. Workers in infrastructure-related skilled trades earn above-average wages and frequently have access to employer-provided retirement savings and health care, the alliance’s press release noted.”It is encouraging that more project owners are recognizing the need for greater private as well as public investment in training prospective construction workers,” Ken Simonson, chief economist for the Associated General Contractors of America, told Engineering News-Record. The median annual wage for construction and extraction occupations sits at approximately $58,360, compared with about $49,500 across all occupations, BLS occupational data showed. The top 10% of electricians earned more than $106,030 in May 2024, according to the Bureau of Labor Statistics, and industry salary surveys show specialized welders in pipeline, nuclear and aerospace work regularly exceed $100,000.The alliance plans a national report to track what training programs workThe coalition’s first initiative will be a Skilled Trades Report developed with Jobs for the Future and nonprofit research organization Burning Glass Institute, designed to measure workforce gaps and identify effective apprenticeship models as new partners join. The alliance follows a broader pattern of corporate workforce bets in 2026. Meta Platforms announced a $115 million craft-training partnership with Associated Builders and Contractors in June.Meta President Dina Powell McCormick said at an Axios event in March that artificial intelligence infrastructure growth could require about 500,000 electricians nationwide, Engineering News-Record reported.”Investment in America’s infrastructure will help shape the country’s long-term economic trajectory, but its success ultimately depends on the skilled workforce that brings these projects to life,” Bayo Ogunlesi, chairman and CEO of Global Infrastructure Partners, a unit of BlackRock, said in the announcement.The coalition did not disclose a unified enrollment target or detail how the founding members’ programs would be coordinated beyond the initial 30 states.Related: Bank of America doubles down on Google stock ahead of earnings