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Google to See Variable Margins, Cloud Segment Growth Through 2028, UBS Says

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Alphabet's (GOOG, GOOGL) Google is set to see "variability" in near-term margins and cloud segment growth through 2028 based on its backlog, UBS Securities said in a Wednesday note.

After dividing the company's backlog into its constituent pieces, UBS raised its Google Cloud revenue estimates by about 24% in 2026 and 34% in 2027, and cut its forecast by about 4% for 2028, according to the note.

The changes result from earlier conversion of certain backlog, particularly related to tensor processing units or TPUs, to revenue from 2028, UBS said. The increased TPU sales revenue is likely to yield a lower margin, potentially compressing Google cloud margins to 27.3% in 2027, before expanding again in 2026, the brokerage added.

Lower margins from chip sales and conversion of non-Vertex-related backlog could also weigh on Google's 2026 and 2027 EPS, UBS noted.

UBS reiterated its neutral rating and $410 price target on Alphabet.

Price: $355.59, Change: $-2.80, Percent Change: -0.78%

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