Baird: Increased capital spending poses risks to Alphabet's (GOOGL.US) Q3 operating profit, EPS

Alphabet (GOOGL.US) will report its latest earnings later this month. Investment bank Baird believes that the company's operating profit and earnings per share metrics could be at risk as capital spending increases. Analyst Colin Sebastian said: "Looking forward to the growth in operating expenses related to data center/infrastructure expansion, we still believe that there is some risk to the operating profit and EPS expectations for Q3. Therefore, we believe there could be a modest 'sell-side reset' after the Q3 earnings report. Wall Street analysts currently broadly expect Alphabet to report Q3 revenue of US$86.23bn and EPS of US$1.84." Despite the analyst saying that capital spending could increase and lead to a GAAP operating margin below consensus, he acknowledged that he "may not fully believe in the revenue potential of AI products and services." The analyst has a "Outperform" rating on Alphabet with a target price of US$200.