Alphabet, Reddit added to Wedbush’s Best Ideas List

Investing.com -- Wedbush analyst Ygal Arounian added both Alphabet and Reddit to the firm's Best Ideas List on Thursday, citing cloud share gains and advertising momentum as the respective investment theses for each name.

On Alphabet, Arounian told investors in a note that second-quarter results reinforced Wedbush's view that the company's "full-stack AI position is translating into real Cloud share gains, even as near-term profitability is limited by rising AI-related spend."

Google Cloud revenue grew 82% year-over-year to $24.8 billion, well ahead of expectations and accelerating from 63% growth in the first quarter. Cloud operating margin expanded to 35.6% from 20.7% a year ago, while Cloud backlog grew to $514 billion.

However, the firm did highlight that Alphabet is raising its full-year 2026 capital expenditure guidance to $195-$205 billion, pushing free cash flow negative to ($5.9) billion in the second quarter.

Wedbush lifted its 2026 and 2027 capex estimates to $205 billion and $297 billion, respectively, with FCF now expected to remain negative through 2027 before an inflection in 2028.

On Reddit, Arounian flagged strong advertising product momentum ahead of second-quarter results due July 30, noting active advertisers grew more than 75% year-over-year in the first quarter with performance formats now exceeding 60% of ad revenue.

Wedbush expects Reddit's AI data-licensing agreements with Google and OpenAI, worth roughly $60 million and $70 million annually, to see "renewal economics step up," representing upside not yet reflected in consensus.

Despite an 8% share drop on July 22 following reports Reddit may restrict Google's access to its content, Arounian expects "ultimately there will be a relationship with potential deeper integrations."

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