New Google Price Target as $1 Billion Dollar Deals Surge

Following the Portfolio moves we made earlier on Thursday, we can add a fresh price target for our shares of Alphabet (GOOGL) , taking it to $320 from $250. We’re also reiterating our existing price targets of $600 and $1,200 for Microsoft (MSFT) and ServiceNow (NOW) shares.

Let’s break down these decisions one by one.

Alphabet

The company, more commonly referred to as Google, delivered a decisive better-than-expected September quarter with EPS of $2.87 on revenue of $102.3 billion compared to the market forecast of $2.26 on $99.96 billion. On a year-over-year basis, revenue rose 16% but helping drive the more than 35% jump in EPS compared to the September 2024 quarter was the continued profit improvement at Google Cloud and a tight rein on sales and marketing expenses. By the numbers, Google advertising revenue rose more than 12% due to continued strength in Search and YouTube monetization, while Google Cloud revenue climbed 33.5% year over year, indicating continued market share gains.

Google Cloud’s backlog hit $155 billion exiting September, up from $106 billion at the end of December. During the earnings call, management shared some figures that help frame that rapid growth. The number of new GCP customers increased by nearly 34% year over year, year to date the number of $1 billion deals inked was larger than those in 2023 and 2024 combined, and over 70% of existing Google Cloud customers are using Google AI products.

In our earlier comments, we flagged Google’s expected capital spending increase to address what it sees as a tight demand-supply environment in the current quarter and 2026. As that ramps, we should see further margin improvement at Google Cloud while the revenue ramp and additional monetization efforts at YouTube help diversify the company’s overall revenue stream.

We admit that some of our price target increase is overdue, but we are also accounting for the improved outlook for Google Cloud and continued gains in Search and YouTube as the company leans even more on AI. Similar to our comments about Meta Platforms (META) , as this investment period winds down, we should see better margins and EPS generation ahead. With that said, GOOGL shares are once again back in an overbought condition following Thursday's action. That condition, along with about 13% upside to our new target, keeps our Two rating intact.

Upcoming catalysts we’ll be paying close attention to include October global Search figures and Google management presentation during the next wave of investor conferences.

Microsoft

Despite a capacity-constrained cloud business, the wide expectation is that Microsoft would deliver solid September quarter results, and the company did just that on Wednesday night. EPS for the quarter came in at $4.13, meaningfully ahead of the $3.67 market consensus. Revenue also surprised to the upside, rising 18.4% year over year to $77.67 billion versus the $75.38 billion consensus. Double-digit revenue gains were achieved almost across the board, led by the company’s cloud businesses and Microsoft 365. Exiting the quarter, its commercial remaining performance obligations (RPOs) hit $400 billion, up 50% year over year, and we should keep in mind that this does not include the recent $250 billion incremental win with OpenAI.

More germane to its bottom line, the company’s operating income climbed 24% year over year due to gains at the Productivity and Business Processes and More Personal Computing segments. Despite the 28% year-over-year increase in Intelligent Cloud revenue, segment operating margins were essentially flat year over year as the company added capacity.

Parsing Microsoft guidance for the current quarter, it sees consolidated revenue up about 15% but operating margins are expected to remain flat year over year and trend down modestly compared to the September 2025 quarter. Similar to Meta and Google, we see this as a period of capacity digestion and one that will last at least until mid-2026. As the company moves past that, we should see margins improve, and EPS growth accelerate further.

That is one reason why we continue to be MSFT shareholders. Another is Microsoft’s ownership stake in OpenAI Group PBC, the for-profit OpenAI entity, and news that OpenAI is preparing for a 2026 IPO. That was one factor that led us to increase our exposure to Suro Capital (SSSS) shares earlier on Thursday. While that may not benefit Microsoft from an operating perspective, the eventual IPO will be a positive for the company’s balance sheet.

Based on AI and cloud adoption metrics in the coming weeks and months, we’ll circle back to our $600 MSFT target price and potential pick-up points.

ServiceNow

Our shares of ServiceNow are climbing following the company’s September quarter earnings report for three reasons. The company’s results surpassed market expectations, it increased its full-year guidance and its board of directors approved a five-for-one stock split. All in all, a pretty nice combination, but we would add three other factors, and they are ones that keep us bullish on NOW shares.

Closely watched Subscription revenue (97% of overall revenue) posted another quarter of more than 20% gains. Current remaining performance obligations (CRPOs) reached $11.35 billion exiting the quarter, up 21% year over year. And total RPOs hit $24.3 billion, up 24% year over year. Those gains reflect a combination of customer wins, increasing customer penetration and the impact of AI adoption by those customers. Digging into ServiceNow’s quickly filed 10Q for the quarter, management sees 47% of that total RPO being recognized as revenue in the coming 12 months.

As we think about that against the market’s revenue consensus of $15.7 billion for 2026, with one quarter to go in 2025, ServiceNow has revenue coverage of easily more than 70%. Keep in mind, with the December 2026 quarter spanning more than 12 months, the company’s remaining non-current RPO would bring some additional 2026 coverage.

Against that kind of visibility, the prospects for further margin leverage as AI becomes a greater part of the revenue mix are favorable. In the September quarter, ServiceNow’s operating margin was 300 basis points ahead of expectation as the company benefited from margin leverage associated with software, the influence of AI on overall pricing, and internal AI operational efficiencies.

To us, the combination of rising revenue and margin expansion is a combination we can get behind. Revisiting our baseball analogy from earlier on Thursday, we continue to think we are only in the third or fourth inning at most when it comes to AI adoption and usage. We will continue to monitor those levels, and should we see the incremental growth rate begin to slow, that could be a reason to revisit our position in NOW shares. For now, we’ll reiterate our $1,200 target and One rating.

While the announced 5-1 stock split will largely be cosmetic in our view, we concede it may help attract some investors given the “more affordable” share price post-split. The shareholder meeting to approve that initiative is set for December 5. Before that event, we are likely to see ServiceNow appear at upcoming investor conferences, and that should give us a nice opportunity to track AI adoption and subscription revenue progress, while others catch up to our thinking. Those events include:

RBC Global TIMT Conference on Tuesday, November 18

UBS Global Technology and AI Conference on Wednesday, December 3

Barclays Global Technology Conference on Wednesday, December 10

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At the time of publication, TheStreet Pro Portfolio was long GOOGL, MSFT, NOW, META and SSSS.