Alphabet strengthens its position in cloud and AI – GOOG shares retain upside potential towards 488 USD

Despite pressure from rising CapEx and additional share issuance, Alphabet continues to demonstrate strong operational momentum. The primary forecast assumes a move towards 405 USD, followed by further growth towards 488 USD.

Alphabet Inc. (NASDAQ: GOOG) released its results, confirming that the strong Q4 2025 performance was not a one-off. Following 18% revenue growth in Q4, the company accelerated to 22% year-on-year in Q1, while operating profit increased by 30% to 39.7 billion USD. The results demonstrate that Alphabet’s core business continues to expand despite an already high comparison base from the previous year.

The primary growth driver was once again Google Cloud. In Q4 2025, cloud revenue grew by 48%, and in Q1 2026, growth accelerated further to 63%. Google Cloud’s operating profit increased by 203% year-on-year, highlighting exceptionally strong demand for cloud solutions, AI infrastructure, Gemini, and TPU products.

The advertising business also demonstrated resilience. Google Search & Other grew by 19%, YouTube Ads by 11%, and Google Subscriptions, Platforms and Devices by 19%. Such performance partly alleviates concerns that AI is already exerting significant pressure on Alphabet’s traditional search business. The weaker segment, Google Network, saw its revenue decline by 4%; however, it no longer plays a decisive role in the company’s valuation.

Following the report, investors initially reacted positively, driving shares higher. However, in the second half of May, upward momentum gave way to renewed pressure. The primary reason was not weakness in the underlying business, but growing concerns over the cost of the AI race. In Q1, Alphabet issued 31.1 billion USD in bonds and later announced a substantial equity offering to finance AI infrastructure. The capital raising does not indicate a critical cash shortfall; rather, it signals that AI development now requires significantly greater investment than in previous years. Consequently, higher capital intensity could weigh on free cash flow and dilute existing shareholders.

The article examines Alphabet Inc., outlines its key sources of revenue, reviews quarterly performance, and presents a technical analysis of GOOG shares, forming the basis for the forecast for Alphabet shares in the 2026 calendar year.

About Alphabet Inc.

Alphabet Inc. was established on 2 October 2015 through a restructuring of Google, which was founded by Larry Page and Sergey Brin in 1998. Google was originally a search engine but gradually evolved into a diversified technology company, covering advertising, cloud services, mobile platforms, and other areas.

By 2015, Google’s scope and diversification had made its management increasingly complex. As a result, a holding structure – Alphabet Inc. – was established, with Google becoming one of its divisions, focusing on core businesses (Search, YouTube, and Android). At the same time, innovative projects, such as Waymo and Verily, were spun off into separate companies under Alphabet’s management.

Since the restructuring, Alphabet has replaced Google as the listed public company on the stock exchange, retaining its existing tickers (GOOGL and GOOG). Larry Page became Alphabet’s CEO, Sergey Brin its President, and Pichai Sundararajan was appointed CEO of Google.

Alphabet is listed on the stock exchange under two tickers, GOOGL and GOOG:

• GOOGL (Class A) – voting shares. Holders of these shares are entitled to vote at shareholder meetings (1 share = 1 vote).
• GOOG (Class C) – non-voting shares. These shares provide the same economic rights (dividends, capital appreciation) but do not grant holders the right to participate in the company’s management.

Alphabet Inc.’s main revenue streams

Alphabet Inc., the parent company of Google and other subsidiaries, generates revenue from several business segments. The primary sources of revenue are outlined below:

• Google services: the largest source of income, driven primarily by advertising. This includes:
• Google Search and others: revenue from advertisements placed on Google Search, Gmail, Google Maps, and other Google-owned services.
• YouTube ads: revenue from banner ads, skippable and non-skippable video ads, and overlay ads on YouTube.
• Subscriptions, platforms, and devices: revenue from subscription services, including YouTube Premium, YouTube TV, Google One, and NFL Sunday Ticket. This category also includes app sales, in-game purchases via the Google Play Store, and hardware sales such as Pixel phones, Nest and Chromecast devices.
• Google Cloud: revenue from cloud computing services, including infrastructure, platform solutions, and apps such as Google Workspace and Gemini for Cloud. Google Cloud serves corporate clients and is growing rapidly, although it still lags behind competitors such as AWS and Microsoft Azure.
• Other Bets: includes Alphabet’s ambitious ventures, such as Waymo (autonomous driving), Verily (healthcare), and GFiber (internet services), with most of the revenue coming from the latter two. Although this segment contributes less to overall revenue, it focuses on long-term innovation and often operates at a loss.
• Alphabet operations: includes small currency-related hedging revenue and other corporate activities. This is not the primary segment but includes other income unrelated to the core segments.

Advertising remains the primary source of Alphabet’s revenue, with Google services, notably Search and YouTube, leading the way. Google Cloud is a growing revenue stream, reflecting Alphabet’s commitment to developing solutions for companies, while other projects are speculative investments with a limited but increasing impact on revenues.

Alphabet Inc.’s financial position

Alphabet Inc. is in a strong financial position, reflecting both stability and strategic momentum. The company continues to deliver steady revenue growth, driven primarily by its advertising operations, particularly via Google Search and YouTube.

Alphabet closed 2024 with revenue of 350 billion USD, a 14% year-on-year increase. Net income rose by 28% to 100 billion USD.

Google Services, which include Search, YouTube, and other platforms, generated 84.1 billion USD in revenue in 2024, up 10% from 2023. The Google Cloud segment also expanded, reaching 12 billion USD, a 10% increase from the previous year.

Alphabet plans to invest around 75 billion USD in 2025, significantly higher than the 52 billion USD in 2024. The primary objective is to expand its AI infrastructure and capabilities. CEO Sundar Pichai emphasised the importance of AI across all the company’s products.

Alphabet Inc. Q1 2025 financial results

On 24 April, Alphabet Inc. published its Q1 2025 financial results for the quarter ended 31 March. The key figures are presented below, compared to the same period in 2024:

• Revenue: 90.2 billion USD (+12%)
• Net income: 34.5 billion USD (+46%)
• Earnings per share: 2.81 USD (+49%)
• Costs and expenses: 59.6 billion USD (+8%)
• Operating income: 30.6 billion USD (+20%)
• Operating margin: 34% (+200 basis points)

Revenue by segment:

• Google Services: 77.3 billion USD (+10%)
• Google advertising: 66.9 billion USD (+8%)
• Google Search & other: 50.7 billion USD (+10%)
• YouTube ads: 8.9 billion USD (+10%)
• Google Network: 7.3 billion USD (–2%)
• Google subscriptions, platforms, and devices: 10.4 billion USD (+19%)
• Google Cloud: 12.3 billion USD (+28%)
• Other Bets: 0.4 billion USD (–10%)

Alphabet’s Q1 2025 report showed resilient growth, enhancing the appeal of the company’s shares to investors. Revenue rose 12% year-on-year, driven by strong performance in its Search division, YouTube, and Google Cloud, while net profit increased by 46%.

The Search segment remains the primary source of revenue, with the rollout of AI Overviews reaching 1.5 billion monthly users, boosting engagement without undermining monetisation. YouTube continues to lead in the streaming segment, boasting a subscriber base of 270 million (across YouTube and Google One), which contributes to a steady stream of high-margin revenue. Google Cloud reported 28% revenue growth and a 17.8% margin, reinforcing the company’s strategic focus on AI infrastructure. The planned acquisition of Wiz for 32 billion USD, expected to close in 2026, will strengthen Alphabet’s cloud security position and enhance its competitiveness in the market.

Alphabet announced a 70 billion USD share buyback and a 5% increase in quarterly dividends, now at 0.21 USD per share, reflecting confidence in its outlook.

The company’s management did not provide specific guidance for Q2 2025, but the analyst consensus forecast expected revenue of 93.6 billion USD and earnings per share of 2.14 USD, indicating continued stable growth.

Chief Financial Officer Anat Ashkenazi highlighted the risks linked to tariffs, particularly affecting the advertising business in the Asia-Pacific region, but confirmed that capital expenditure in Q1 2025 (17.2 billion USD) was in line with the full-year plan. The company’s ongoing focus on innovation in Search, the expansion of its Cloud business, and the development of autonomous transport via Waymo (which now covers over 500 square miles) are creating multiple growth drivers.

Alphabet’s strong quarterly performance underscores its ability to adapt and grow even in a highly competitive environment. Its leadership in AI, continued growth in its Cloud division, and ongoing share buyback programs and dividend payouts make the company’s shares appealing to investors with a focus on future-facing technologies.

Alphabet Inc. Q2 2025 financial results

On 23 July, Alphabet Inc. released its Q2 2025 financial results for the quarter ended 30 June. The key figures, compared with the same period in 2024, are as follows:

• Revenue: 96.43 billion USD (+14%)
• Net income: 28.20 billion USD (+19%)
• Earnings per share (EPS): 2.31 USD (+22%)
• Costs and expenses: 65.16 billion USD (+14%)
• Operating income: 31.27 billion USD (+14%)
• Operating margin: 32.4% (+40 basis points)

Revenue by segment:

• Google Services: 82.5 billion USD (+12%)
• Google advertising: 71.34 billion USD (+10%)
• Google Search & other: 54.19 billion USD (+11%)
• YouTube ads: 9.79 billion USD (+13%)
• Google Network: 7.35 billion USD (–1%)
• Google subscriptions, platforms, and devices: 11.20 billion USD (+20%)
• Google Cloud: 13.62 billion USD (+32%)
• Other Bets: 0.37 billion USD (+2%)

Alphabet Inc. (GOOGL) delivered strong Q2 2025 results, surpassing market expectations. Growth was fuelled by the rapid expansion of AI‑related initiatives and robust demand for cloud solutions. However, the report also highlighted several challenges that weighed on investor sentiment and the short‑term outlook for the stock.

Alphabet’s revenue reached approximately 96.4 billion USD, up 14% year-on-year. Earnings per share came in at 2.31 USD, exceeding both last year’s result (+22%) and the analyst consensus estimate of 2.14 USD. These figures signalled the company’s strong operating efficiency.

AI technologies and related products were the primary growth drivers:

• Google’s Search business delivered more than 11% growth in advertising revenue.
• YouTube ad revenue rose by approximately 13%.
• Google Cloud posted an outstanding 32% increase in revenue.

Additional growth catalysts included AI‑powered products, such as AI Overviews, AI Mode, and the Gemini chatbot, all of which were actively integrated into the Google ecosystem. According to company data, AI Overviews were used by more than 2 billion users per month at the time, AI Mode had reached 100 million users in the US and India, and Gemini had 450 million active users.

In its forward guidance, Alphabet announced an increase in capital expenditure for 2025 from 75 billion USD to 85 billion USD. The funds were allocated to expanding data centres, developing cloud infrastructure, and scaling AI platforms – highlighting the seriousness of Alphabet’s strategy in its pursuit of AI leadership.

Despite the strong results, several weaknesses emerged in the report:

• The sharp rise in capital expenditure raised concerns over investment returns
• Operating losses in the Other Bets segment reached USD 1.25 billion, widening from the previous year.
• Questions arose about the viability of investments in areas such as Waymo.
• Regulatory risks have intensified, particularly with ongoing antitrust litigation in the US.

Following the earnings release, Alphabet shares opened 3.4% higher but gave up nearly all gains by the close. The increase in capital spending and continued losses from non-core projects led investors to question the sustainability of current growth rates and capital efficiency. Lingering regulatory risks further pressured sentiment, ultimately offsetting the initial optimism.

Alphabet Inc. Q3 2025 financial results

On 29 October, Alphabet published its Q3 2025 financial results for the quarter ended 30 September. The key figures, compared with the same period in 2024, are as follows:

• Revenue: 102.35 billion USD (+16%)
• Net income: 34.98 billion USD (+33%)
• Earnings per share: 2.87 USD (+35%)
• Costs and expenses: 71.12 billion USD (+19%)
• Operating income: 34.69 billion USD (+22%)
• Operating margin: 31% (–100 bps)

Revenue by segment:

• Google Services: 87.05 billion USD (+14%)
• Google advertising: 71.18 billion USD (+13%)
• Google Search & other: 56.57 billion USD (+15%)
• YouTube ads: 10.26 billion USD (+15%)
• Google Network: 7.35 billion USD (–3%)
• Google subscriptions, platforms, and devices: 12.87 billion USD (+21%)
• Google Cloud: 15.16 billion USD (+34%)
• Other Bets: 0.34 billion USD (–11%)

Alphabet’s Q3 2025 report was exceptionally strong, far exceeding analyst expectations. Revenue reached 102.3 billion USD (+16% y/y) – the first time in the company’s history that quarterly revenue has surpassed 100 billion USD, compared with market forecasts of around that level.

Excluding a one-off fine from the European Commission, operating profit came to approximately 34.7 billion USD (+22% y/y), while the operating margin rose to 33.9% from 32.3% a year earlier. Adjusted earnings per share (non-GAAP EPS) were estimated at 3.10 USD, well above the consensus forecast of about 2.26 USD. In other words, the company outperformed expectations on both revenue and profit.

Growth was evident across all business areas. The core Google Services division generated 87.1 billion USD (+14%), including Search – 56.6 billion USD (+15%), YouTube Ads – 10.3 billion USD (+15%), and subscriptions, platforms, and devices – 12.9 billion USD (+21%). The Cloud segment expanded by 34% to 15.2 billion USD, with a backlog of 155 billion USD, which confirms sustained demand for AI infrastructure.

During the earnings call, management highlighted the success of its full-stack AI strategy, spanning proprietary TPU and Axion chips as well as models and products. The company emphasised strong demand for AI-driven solutions across Search, YouTube, and Cloud, describing the quarter as highly successful, with double-digit growth in all key areas.

While Alphabet did not provide detailed revenue or profit guidance for upcoming periods, it raised its full-year capital expenditure outlook to 91–93 billion USD (from 85 billion USD previously). It warned that CapEx would increase further in 2026 due to continued investment in data centres, energy, and AI infrastructure. This indicates that Alphabet anticipates sustained demand for its cloud and AI services over the coming years.

Alphabet Inc. Q4 2025 financial results

On 4 February, Alphabet published its Q4 2025 financial results for the quarter ended 31 December. Below are the key figures compared with the same period in 2024:

• Revenue: 113.83 billion USD (+18%)
• Net income: 34.46 billion USD (+30%)
• Earnings per share: 2.82 USD (+31%)
• Costs and expenses : 77.89 billion USD (+19%)
• Operating income : 35.93 billion USD (+16%)
• Operating margin : 31.6% (–50 basis points)

Revenue by segment:

• Google Services : 95.86 billion USD (+14%)
• Google advertising : 82.28 billion USD (+14%)
• Google Search & other: 63.07 billion USD (+17%)
• YouTube ads: 11.38 billion USD (+9%)
• Google Network: 7.83 billion USD (–2%)
• Google subscriptions, platforms, and devices : 13.58 billion USD (+17%)
• Google Cloud: 17.66 billion USD (+48%)
• Other Bets: 0.37 billion USD (–8%)

Alphabet’s Q4 2025 report was strong in terms of both growth quality and profitability. Quarterly revenue reached 113.83 billion USD (+18% year-on-year), exceeding the consensus estimate of around 111.40 billion USD, while net income rose to 34.46 billion USD (+30% year-on-year). At the EPS level, the company also demonstrated acceleration, with diluted earnings per share of 2.82 USD (+31% year-on-year).

Revenue from Google Search & other increased to 63.07 billion USD (+17% year-on-year), while the overall Google advertising segment rose to 82.28 billion USD. YouTube ads grew by 9% to 11.38 billion USD – moderate yet stable growth, while Google Network declined slightly (7.83 billion USD, –2% year-on-year). Google Cloud was the primary growth driver, increasing revenue by 48% and raising its operating margin to 30.1%.

Alphabet stated that CapEx in 2026 was expected to range between 175–185 billion USD (almost double the 2025 level), and that outlook ultimately overshadowed the otherwise positive earnings results. From a business perspective, the projected spending signalled strong utilisation and demand for computing capacity. However, for the market, it immediately raised questions about free cash flow, depreciation and amortisation, and return on invested capital (ROIC): at such levels of capital expenditure, even very strong margins may temporarily appear weaker due to higher D&A and increased energy and equipment requirements.

At the same time, financial resilience appeared comfortable. At the end of 2025, the company held approximately 126.84 billion USD in cash and marketable securities, meaning Alphabet could finance its investment cycle without liquidity stress. However, debt increased noticeably (long-term debt of 46.55 billion USD), and in November 2025, the company raised approximately 24.80 billion USD through the issuance of unsecured notes. This development indicated management was already optimising the capital structure in response to the rising capital intensity of the AI race.

Alphabet Inc. Q1 2026 financial results

On 29 April, Alphabet released its Q1 2026 results for the quarter ended 31 March. Below are the key figures compared with the same period in 2025:

• Revenue: 109.90 billion USD (+22%)
• Net income: 62.58 billion USD (+81%)
• Earnings per share: 5.11 USD (+82%)
• Costs and expenses: 70.20 billion USD (+18%)
• Operating income: 39.70 billion USD (+30%)
• Operating margin: 36.1% (+200 basis points)

Revenue by segment:

• Google Services total: 89.64 billion USD (+16%)
• Google advertising: 77.25 billion USD (+15%)
• Google Search & Other: 60.40 billion USD (+19%)
• YouTube Ads: 9.88 billion USD (+11%)
• Google Network: 6.97 billion USD (–4%)
• Google Subscriptions, Platforms and Devices: 12.38 billion USD (+19%)
• Google Cloud: 20.03 billion USD (+63%)
• Other Bets: 411 million USD (–9%)

Alphabet’s Q1 2026 report was exceptionally strong, particularly when viewed alongside Q4 2025, which had already delivered solid results. In Q1 2026, while revenue declined sequentially due to seasonality, year-on-year growth accelerated to 22%. That acceleration is significant: following a strong end to 2025, Alphabet did not lose momentum. On the contrary, growth in Search, subscriptions, and Cloud remained resilient.

The primary highlight of the report was Google Cloud. In Q4 2025, cloud revenue grew by 48%, with operating margin rising to 30.1%. In Q1 2026, Cloud accelerated further, with revenue increasing by 63% and operating profit surging by 203%. The advertising business also performed better than expected, despite concerns that AI services might begin to pressure traditional search. Google Search & Other grew by 19%, compared with 17% in Q4 2025, indicating renewed acceleration. The weaker segment remained Google Network, where revenue declined by 4%; however, this division has long played a diminishing role in Alphabet’s investment narrative.

Profitability appears extremely strong at first glance: net income rose to 62.58 billion USD, and EPS reached 5.11 USD. However, an important adjustment is required. A significant portion of the increase was driven by unrealised investment gains. Alphabet stated that this factor added 28.7 billion USD to net income and 2.35 USD to EPS. Operating performance is therefore more informative than headline EPS: operating income increased by 30%, and operating margin expanded to 36.1%. These figures demonstrate that the core business genuinely strengthened, even though part of the reported net income was boosted by investment revaluations.

The primary risk remains the same as after Q4 2025, although it has become more pronounced. In the previous quarter, Alphabet projected 2026 CapEx in the range of 175–185 billion USD. Following Q1, guidance was raised to 180–190 billion USD. In Q1 alone, capital expenditure reached 35.67 billion USD, with free cash flow declining to 10.12 billion USD, compared with 24.55 billion USD in Q4 2025. From a business perspective, elevated spending is logical given the strong demand for AI infrastructure. From a market perspective, however, the greater the investment in data centres, servers, chips, and energy capacity, the stronger the pressure on free cash flow.

Overall, Q1 2026 reinforced Alphabet’s investment thesis. After Q4 2025, the central question was whether the company could sustain acceleration in Search and Cloud amid sharply rising AI-related spending. For now, the answer appears positive: Search accelerated, Cloud delivered strong growth, and operating margin improved. Going forward, attention must shift beyond revenue growth to the pace at which capital expenditure converts into profit and free cash flow. That conversion dynamic will likely become the key test for Alphabet in the coming quarters.

Analysis of key valuation multiples for Alphabet Inc.

Below are the key valuation multiples for Alphabet based on the Q1 2026 financial year results, calculated at a share price of 372 USD.

Valuation multiples analysis for Alphabet Inc. – conclusion

Across most key metrics, Alphabet currently trades at an elevated valuation. This is particularly evident on a P/S, EV/Sales, P/FCF, EV/EBITDA, and EV/EBIT basis. At first glance, a P/E of 28.33 may appear more moderate; however, an important nuance should be noted. In Q1 2026, Alphabet recorded 37.7 billion USD in other income, primarily driven by 36.9 billion USD in unrealised investment gains. That contribution significantly boosted net income over the trailing twelve months and made the P/E ratio appear lower than it would on a cleaner operating basis.

Alphabet’s strengths remain clear: a robust balance sheet, a net cash position, substantial interest coverage, and sustained growth across its core business segments. At the same time, the company sharply increased capital expenditure to 35.7 billion USD in the quarter, which is already exerting pressure on free cash flow and making FCF-based multiples appear heavier.

Overall, Alphabet is a high-quality asset trading at an elevated valuation. The company may remain attractive to long-term investors due to its strong positions in search, cloud, and AI, as well as its solid balance sheet. However, at the current share price, the market is already pricing in elevated expectations. As a result, the margin of safety based on valuation multiples appears limited.

Expert forecasts for Alphabet Inc. stock

• Barchart: 44 out of 54 analysts rated Alphabet shares as Strong Buy, 4 as Moderate Buy, and 6 as Hold. The upper price target is 515 USD, and the lower bound is 360 USD.
• MarketBeat: 34 out of 38 analysts assigned a Buy rating, and 4 recommended Hold. The upper price target is 470 USD, and the lower bound is 270 USD.
• TipRanks: 10 out of 10 analysts assigned a Buy rating. The upper price target is 470 USD, and the lower bound is 390 USD.
• Stock Analysis: 43 out of 64 analysts rated Alphabet shares as Strong Buy, 14 as Buy, and 7 as Hold. The upper price target is 470 USD, and the lower bound is 348 USD.

Alphabet Inc. stock price forecast for 2026

On the daily chart, Alphabet shares are trading above the 200-period moving average, indicating that the long-term uptrend remains dominant. The Stochastic indicator has moved into oversold territory, signalling the possible completion of the corrective phase and a potential resumption of upward movement within the prevailing trend. Based on the current price dynamics of Alphabet Inc. shares, the potential scenarios for 2026 are as follows:

The primary forecast for Alphabet shares suggests further upside, with a breakout above resistance at 405 USD. The main upside target is 488 USD, identified using Fibonacci levels.

The alternative forecast for Alphabet stock should be considered if the price breaks below support at 350 USD. In this scenario, the price could decline towards 271 USD.

Open Account