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GOOGL Rises 79% in a Year on AI Push: Will the Rally Continue in 2026?
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Key Takeaways
GOOGL has outpaced tech peers with a 78.9% stock gain, driven by aggressive AI integration efforts.
Google Cloud's AI-driven growth includes a 34% y/y revenue rise and a $155B backlog in 3Q25.
Despite strong growth, high valuation and cloud capacity limits may pressure GOOGL's 2026 outlook.
Alphabet (GOOGL - Free Report) shares have jumped 78.9% in a year, outperforming the Zacks Computer and Technology sector’s appreciation of 26.9% and the Zacks Internet Services industry’s surge of 75.5%. GOOGL’s outperformance can be attributed to its continuing AI push across its search and cloud computing platform.
An expanding focus on improving enterprise footprint is expected to boost prospects amid stiff competition in the cloud computing domain from the likes of Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) . This, along with Google Cloud’s capacity constraints and an uncertain macroeconomic environment, has the potential to hamper prospects. Will the rally in GOOGL stock continue in 2026? Let us find out.
GOOGL Shares Outperform Peers on AI Push
GOOGL shares have beaten peers like Microsoft, Apple (AAPL - Free Report) and Amazon over the past year courtesy of an aggressive AI push. Shares of Microsoft, Apple and Amazon have returned 10.1%, 12.6% and 0.5%, respectively, over the same time frame.
GOOGL Stock’s 1-Year Performance
Image Source: Zacks Investment Research
Google continues to dominate the Search business with a roughly 90% share, followed by Microsoft’s Bing, with a 4.22% share, per the latest data from StatCounter.
The company has been actively embedding AI, especially within Search, to enhance user experience, provide better AI-focused features and consequently improve ad performance. AI Overviews and AI Mode are driving overall queries and commercial queries, thereby driving monetization opportunities. The addition of shopping capabilities in AI Mode is now helping people shop conversationally in Search. Google has added new AI features in Search that help users build travel plans.
AI Max and Search are already used by hundreds of thousands of advertisers, making it the fastest-growing AI-powered search ads product. AI Max is helping businesses identify new customers by delivering the most relevant ad across surfaces. It is also expanding the reach and accessibility of advertisers by matching them against additional queries. GOOGL continues to infuse Generative AI (Gen AI) capabilities at every step of the marketing process. The availability of Imagen 4 in Asset Studio and Product Studio is helping businesses produce more and better creatives.
In November, Alphabet launched Gemini 3, its latest state-of-the-art reasoning model. It now powersSearch, via AI Mode. Google AI Pro and Ultra subscribers in nearly 120 countries and territories in English can use Gemini 3 Pro by selecting “Thinking with 3 Pro” from the model drop-down menu in AI Mode.
Expanding Cloud Footprint Aids GOOGL Prospects
Alphabet’s Google Cloud is benefiting from rising AI revenues, with cloud backlog growing 46% sequentially to $155 billion in the third quarter of 2025. Google Cloud revenues jumped 34% year over year, driven by growth in Google Cloud Platform (GCP) across core products, AI Infrastructure and Gen AI Solutions.
The number of new GCP customers increased roughly 34% year over year, and Alphabet signed more deals above $1 billion through the reported quarter than it did in the previous two years combined. Expanding clientele and relationships have been driving top-line growth, with more than 70% of existing Google Cloud customers currently using its AI products.
Google Cloud is benefiting from Gen AI adoption due to leading models, including Gemini, Imagen, Veo, Chirp and Lyria. Gemini Enterprise is gaining adoption with more than two million subscribers across 700 companies.
Alphabet’s expanding AI infrastructure is helping it win enterprise clients. GCP’s prospects remain robust, driven by strong demand for enterprise AI infrastructure, including TPUs and GPUs, enterprise AI solutions driven by demand for the latest Gemini and other AI models, and other services, including cybersecurity and data analytics.
Earnings Estimate Revisions Positive for GOOGL Stock
The Zacks Consensus Estimate for fourth-quarter 2025 earnings is pegged at $2.58 per share, up by a penny over the past 30 days, indicating 20% year-over-year growth. The consensus mark for fourth-quarter 2025 revenues is pegged at $94.26 billion, indicating 15.5% year-over-year growth.
The consensus mark for 2025 earnings is pegged at $10.52 per share, up 0.6% over the past 30 days, suggesting 30.9% growth from the 2024 reported figure. The Zacks Consensus Estimate for 2025 revenues is pegged at $340.26 billion, implying 15.3% growth from the 2024 reported figure.
GOOGL Valuation: Rich
A Value Score of D suggests a premium valuation for Alphabet at this moment. GOOGL stock is overvalued, with a forward 12-month price/sales of 9.84X compared with the industry’s 7.82X, sector’s 6.8X, Amazon’s 3.07X, and Apple’s 8.98X.
GOOGL Stock’s Valuation
Image Source: Zacks Investment Research
How Should You Approach GOOGL Stock in 2026
Alphabet’s growing AI-powered search capabilities and significant investments in cloud computing bode well for its prospects next year. GOOGL expects capital expenditure between $91 billion and $93 billion for 2025, which is anticipated to increase further in 2026.
However, capacity constraints, despite the improving pace of server deployments and data center construction, are expected to hurt Alphabet’s prospects in 2026. This, along with higher depreciation expenses and related data center operations costs, including energy, is expected to hurt profitability. Higher sales and marketing expenses are expected to keep the margins under pressure. These factors, along with GOOGL’s premium valuation, are concerning for investors in the near term.
Image: Bigstock
GOOGL Rises 79% in a Year on AI Push: Will the Rally Continue in 2026?
Key Takeaways
Alphabet (GOOGL - Free Report) shares have jumped 78.9% in a year, outperforming the Zacks Computer and Technology sector’s appreciation of 26.9% and the Zacks Internet Services industry’s surge of 75.5%. GOOGL’s outperformance can be attributed to its continuing AI push across its search and cloud computing platform.
An expanding focus on improving enterprise footprint is expected to boost prospects amid stiff competition in the cloud computing domain from the likes of Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) . This, along with Google Cloud’s capacity constraints and an uncertain macroeconomic environment, has the potential to hamper prospects. Will the rally in GOOGL stock continue in 2026? Let us find out.
GOOGL Shares Outperform Peers on AI Push
GOOGL shares have beaten peers like Microsoft, Apple (AAPL - Free Report) and Amazon over the past year courtesy of an aggressive AI push. Shares of Microsoft, Apple and Amazon have returned 10.1%, 12.6% and 0.5%, respectively, over the same time frame.
GOOGL Stock’s 1-Year Performance
Image Source: Zacks Investment Research
Google continues to dominate the Search business with a roughly 90% share, followed by Microsoft’s Bing, with a 4.22% share, per the latest data from StatCounter.
The company has been actively embedding AI, especially within Search, to enhance user experience, provide better AI-focused features and consequently improve ad performance. AI Overviews and AI Mode are driving overall queries and commercial queries, thereby driving monetization opportunities. The addition of shopping capabilities in AI Mode is now helping people shop conversationally in Search. Google has added new AI features in Search that help users build travel plans.
AI Max and Search are already used by hundreds of thousands of advertisers, making it the fastest-growing AI-powered search ads product. AI Max is helping businesses identify new customers by delivering the most relevant ad across surfaces. It is also expanding the reach and accessibility of advertisers by matching them against additional queries. GOOGL continues to infuse Generative AI (Gen AI) capabilities at every step of the marketing process. The availability of Imagen 4 in Asset Studio and Product Studio is helping businesses produce more and better creatives.
In November, Alphabet launched Gemini 3, its latest state-of-the-art reasoning model. It now powersSearch, via AI Mode. Google AI Pro and Ultra subscribers in nearly 120 countries and territories in English can use Gemini 3 Pro by selecting “Thinking with 3 Pro” from the model drop-down menu in AI Mode.
Expanding Cloud Footprint Aids GOOGL Prospects
Alphabet’s Google Cloud is benefiting from rising AI revenues, with cloud backlog growing 46% sequentially to $155 billion in the third quarter of 2025. Google Cloud revenues jumped 34% year over year, driven by growth in Google Cloud Platform (GCP) across core products, AI Infrastructure and Gen AI Solutions.
The number of new GCP customers increased roughly 34% year over year, and Alphabet signed more deals above $1 billion through the reported quarter than it did in the previous two years combined. Expanding clientele and relationships have been driving top-line growth, with more than 70% of existing Google Cloud customers currently using its AI products.
Google Cloud is benefiting from Gen AI adoption due to leading models, including Gemini, Imagen, Veo, Chirp and Lyria. Gemini Enterprise is gaining adoption with more than two million subscribers across 700 companies.
Alphabet’s expanding AI infrastructure is helping it win enterprise clients. GCP’s prospects remain robust, driven by strong demand for enterprise AI infrastructure, including TPUs and GPUs, enterprise AI solutions driven by demand for the latest Gemini and other AI models, and other services, including cybersecurity and data analytics.
Earnings Estimate Revisions Positive for GOOGL Stock
The Zacks Consensus Estimate for fourth-quarter 2025 earnings is pegged at $2.58 per share, up by a penny over the past 30 days, indicating 20% year-over-year growth. The consensus mark for fourth-quarter 2025 revenues is pegged at $94.26 billion, indicating 15.5% year-over-year growth.
Alphabet Inc. Price and Consensus
Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote
The consensus mark for 2025 earnings is pegged at $10.52 per share, up 0.6% over the past 30 days, suggesting 30.9% growth from the 2024 reported figure. The Zacks Consensus Estimate for 2025 revenues is pegged at $340.26 billion, implying 15.3% growth from the 2024 reported figure.
GOOGL Valuation: Rich
A Value Score of D suggests a premium valuation for Alphabet at this moment. GOOGL stock is overvalued, with a forward 12-month price/sales of 9.84X compared with the industry’s 7.82X, sector’s 6.8X, Amazon’s 3.07X, and Apple’s 8.98X.
GOOGL Stock’s Valuation
Image Source: Zacks Investment Research
How Should You Approach GOOGL Stock in 2026
Alphabet’s growing AI-powered search capabilities and significant investments in cloud computing bode well for its prospects next year. GOOGL expects capital expenditure between $91 billion and $93 billion for 2025, which is anticipated to increase further in 2026.
However, capacity constraints, despite the improving pace of server deployments and data center construction, are expected to hurt Alphabet’s prospects in 2026. This, along with higher depreciation expenses and related data center operations costs, including energy, is expected to hurt profitability. Higher sales and marketing expenses are expected to keep the margins under pressure. These factors, along with GOOGL’s premium valuation, are concerning for investors in the near term.
Alphabet currently has a Zacks Rank #3 (Hold), suggesting that investors should wait for a more favorable point to accumulate the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.