Alphabet’s 18% 2026 Earnings Growth Forecast and Cheap Bullish Calls
Alphabet has dropped 3% year-to-date after a historically weak February, with flat implied volatility skew signalling relatively inexpensive bullish calls and a one-month expected move of $284.69–$322.59. Analysts now see 18% earnings growth for 2026 while capex jumped 95% year-over-year for AI infrastructure, highlighting concentrated spending and ongoing sector volatility.
1. Seasonal Weakness and Option Skew
Alphabet is 3% lower since January after February underperforms seasonally, yet implied volatility skew around the spot price remains flat and calm. Put IV sits below call IV toward lower strikes, suggesting that downside protection is de-emphasized and bullish call premiums are relatively cheap.
2. Expected Move Analysis
Using Black-Scholes, a one-standard-deviation expected move by March 20 spans $284.69 to $322.59, reflecting market-priced uncertainty. A Markov-based second-order model refines this range to $295–$325, with the highest probability density between $301 and $315.
3. Earnings Growth and Capex Surge
Consensus estimates for Alphabet’s 2026 earnings growth have risen to 18% from 14%, driven in part by AI-related revenue expectations. Meanwhile, capital expenditures climbed 95% year-over-year as the company ramps AI data center and infrastructure investments.
4. AI Model Sentiment and Sector Volatility
Prediction market odds assign Google a 44¢ probability to deliver the top AI model by end-March, reflecting optimism about its AI positioning. At the same time, strategists warn that software sector volatility will persist even as major tech firms vie for AI leadership.