Alphabet Q1: First Signs Of Depreciation Pressuring EPS Are Here

The author downgrades Alphabet (GOOG.OQ) ahead of its Q1 2026 earnings (due April 29), arguing that a spike in depreciation tied to the AI CapEx cycle will pressure EPS. Street consensus is for mid-single-digit year-over-year EPS decline. While the core bull pillars — AI benefits to Google Cloud and Search — remain intact, the biggest near-term risk is a potential CapEx upgrade: management’s FY26 guidance of $175B–$185B would nearly double 2025 spending and could push more costs onto the income statement. The author prefers to wait until the Q1 print, suggesting the EPS hit may not be fully priced in.