Alphabet's Search Engagement Accelerates Despite 'Messy' Q3, RBC Says

12:14 PM EDT, 10/29/2026 (MT Newswires) -- Alphabet (GOOG, GOOGL) reported a "messy" Q3, with search growth and margins falling short of expectations while AI-related spending continued to rise, RBC Capital Markets said Thursday. On Wednesday, Alphabet posted Q3 results that missed Wall Street's estimates as higher AI-computing costs weighed on profitability and capital spending remained elevated. RBC said a key bright spot was accelerating search engagement, with query growth reaching its highest level in five years as AI features drove greater usage. While the company has not yet fully monetized that increase in activity, the firm said the trend pushes back against concerns about search's long-term growth prospects. RBC also said investors are assigning little credit to potential profit contributions from Alphabet's AI infrastructure. The analyst sees margin upside in 2027 and 2028 as higher usage across Google's AI services and cloud business improves the economics of those investments. RBC lowered its price target on Alphabet stock to $400 from $425 and maintained its outperform rating. Price: 283.72, Change: -38.17, Percent Change: -11.86