Where Is Alphabet Stock Headed?
Google (NASDAQ:GOOG) just crossed $100 billion in quarterly revenue for the first time in Q3 2025. That’s not a peak – it’s the new baseline. As we head into 2026, three massive engines are revving up: Cloud is hitting inflection, AI is monetizing at scale, and Waymo is transitioning from expensive experiment to actual revenue business.
The stock is trading around $315 with a market cap near $3.9 trillion. It’s up 60% year-to-date through December 2025, hitting an all-time high of $329 in late November. The question for 2026 isn’t whether Google grows – it’s how fast.
Revenue and Earnings Expectations for 2026
What are analysts actually forecasting for next year?
- 2026 Full-Year Revenue: $455 billion (14% growth from – $400 billion estimated in 2025)
- 2026 EPS: $11.24 (6% growth from $10.63 estimated in 2025)
- Current Trading Multiples: 31x trailing P/E, 28x forward P/E
The revenue story is solid – double-digit growth on a $400 billion+ base. But here’s the puzzle: why is EPS growth so much slower at only 6%? Because Google is spending massively on infrastructure. Capital expenditures hit $91-93 billion in 2025 and will climb even higher in 2026. Depreciation expenses are accelerating. That CapEx spending is compressing near-term earnings growth while building long-term capacity.
Think of 2026 as the investment year. Google is plowing cash into data centers, AI chips, and Waymo expansion. We are talking about $110 billion+ in capital expenditures in 2026. The payoff comes in 2027-2028 when that infrastructure starts generating returns without proportional cost increases.
In this analysis, we dive into the factors that could propel the stock growth in 2026. But before we dive in, if you seek an upside with less volatility than holding an individual stock like GOOG, consider the High Quality Portfolio. It has comfortably outperformed its benchmark—a combination of the S&P 500, Russell, and S&P MidCap indexes—and has achieved returns exceeding 105% since its inception. Why is that? As a group, HQ Portfolio stocks provided better returns with less risk versus the benchmark index; less of a roller-coaster ride, as evident in HQ Portfolio performance metrics.
Growth Drivers: What Could Propel 2026?
1. Google Cloud: The Breakout Story
Is Cloud finally hitting the growth inflection everyone’s been waiting for? The data screams yes.
Current Performance:
- Q3 2025 revenue: $15.2 billion, up 34% year-over-year
- Operating margin: 23.7% and climbing toward 25%+
- Backlog: $155 billion in undelivered orders
But here’s where 2026 gets interesting. Some Wall Street analysts project Cloud revenue could surge over 50% in 2026. That’s big. But why such explosive growth? Two factors:
- The Backlog Conversion: That $155 billion backlog historically converts at 45-50% of annual cloud revenue. Google’s been signing massive multi-year contracts throughout 2025. In 2026, those contracts start delivering actual revenue. The sales are already booked – it’s just execution now.
- AI Workload Demand: Over 70% of Google’s existing cloud customers now use AI products. Every company needs computing power for AI, and Google is selling infrastructure at scale. That continues through Q4 2025 and into 2026. When supply is constrained and demand is high, pricing power improves.
The math: if Cloud does $60 billion in 2025 and grows 50% in 2026, that’s $90 billion. On a $453 billion revenue base, Cloud would represent 20% of total revenue versus 15% today. Cloud operating margins are also improving — from 17% in Q3 2024 toward 25% as the business scales. That’s high-quality, profitable growth. Also, see how Google’s financials compare to those of its peers.
2. AI Integration: Monetization Finally Kicks In
Will AI cannibalize Google’s golden goose search business? So far, the opposite is happening.
The AI Numbers:
- Google Search: grew 15% in Q3 2025 to $56.6 billion despite AI disruption fears
- AI Mode: 75+ million daily active users in the U.S., with queries doubling in Q3
- Gemini: 650 million monthly active users by late 2025, up from 450 million mid-year
Here’s what matters for 2026: monetization. Reports indicate Google plans to introduce ads into Gemini conversations by 2026. Even if that gets delayed or moderated, AI-enhanced search is already displaying ads through AI Overviews. Longer engagement time with AI responses creates more advertising inventory, not less.
The feared “ChatGPT kills Google” narrative hasn’t materialized. Google’s search market share remains near 90%. ChatGPT has 800 million weekly users, but how many are using it as a Google replacement versus a complementary tool? The 15% growth in Google’s search revenue answers that question.
In other words, AI isn’t disrupting Google’s business — it’s expanding it. More ways to search, more engagement time, more ad inventory, more cloud demand. That’s the 2026 thesis.
3. Waymo: From Cash Burn to Revenue Machine
Is Waymo finally becoming financially relevant? The 2026 setup says yes.
Current State:
- Rides: 250,000+ paid rides per week (some reports cite 450,000 by December 2025)
- Total 2025 trips: 14+ million, heading toward 20+ million by year-end
- 2025 Revenue Estimate: $350 million
- Operating Loss: $1+ billion per quarter in “Other Bets” segment, which Waymo is part of.
The 2026 Expansion:
Waymo is targeting 1 million paid rides per week by the end of 2026. That’s a 100-150% increase from current levels. The company is expanding to 20+ new cities, including:
U.S. Markets: Detroit, Las Vegas, Miami, Dallas, Denver, Seattle, Nashville, San Diego, Washington D.C.
International: Tokyo and London launch in 2026
Fleet size doubles from 2,500 to 5,000+ vehicles. New Zeekr custom robotaxis join the Jaguar I-PACE fleet, offering better unit economics.
Revenue Math:
If Waymo hits 1 million rides per week at a $20 average fare, this would translate into a $1 billion annual run rate by late 2026. Analysts project $750 million to $1.3 billion in 2026 revenue. That’s still tiny on a $453 billion revenue base—but it’s 100%+ growth in a business with massive long-term potential.
More importantly, CEO Sundar Pichai stated Waymo will be “meaningful in our financials” by 2027-2028. That comment signals 2026 as the critical scaling year.
The Valuation Angle:
Reports indicate Waymo is seeking to raise $15 billion at a $100-110 billion valuation. If successful, that would value Waymo at 3-4% of Alphabet’s total market cap while still operating at a loss. The market’s betting on Waymo becoming a multi-billion dollar business by 2027-2028. See our take on – Google Stock’s Quiet $100 Billion Bet for more details.
4. YouTube and Core Advertising: Steady Growth Engine
Can traditional advertising keep growing in an AI world? Q3 2025 says yes.
- YouTube Ads: $10.26 billion in Q3, beating expectations
- Total Google Advertising: $74.18 billion in Q3, up from $65.85 billion year-ago
- Subscriptions (YouTube TV, Music, Premium): Growing steadily with YouTube Premium and Music, along with Google One, reached a combined milestone of over 300 million paid subscriptions.
YouTube’s not just an advertising platform anymore – it’s an entertainment ecosystem. YouTube TV competes with cable. YouTube Premium offers ad-free experiences. YouTube Shorts competes with TikTok.
Overall, the advertising business isn’t dying—it’s evolving. Google is integrating AI into Performance Max campaigns, optimizing ad spend across the entire ecosystem. Better ROI for advertisers = more spending = revenue growth.
5. Capital Expenditure: Building Tomorrow’s Infrastructure Today
Why is Google spending $91-93 billion in 2025, with a “significant increase” planned for 2026? Because they’re racing to build AI infrastructure before demand outpaces supply.
The CapEx Strategy:
- 60% going to servers (TPUs, GPUs for AI workloads)
- 40% to data centers and networking
- 2026 spend could hit $100-120+ billion
This isn’t waste — it’s pre-positioned capacity. The $155 billion Cloud backlog requires infrastructure. Every dollar spent today becomes billable compute tomorrow. The Meta partnership, where Meta is leasing TPUs and planning to install Google-designed TPU clusters, validates the strategy. If you’re Meta, you don’t lock in multi-billion dollar infrastructure deals unless you’re confident about demand.
The risks? If AI demand slows, Google is sitting on underutilized, expensive data centers. If a recession hits, Cloud demand could soften. But management’s seeing the opposite – tight supply conditions continuing into 2026.
Analyst Sentiment: Where Does Wall Street Stand?
The Consensus:
- 75 analysts covering GOOG
- Strong Buy consensus with 50 Buy ratings, 9 Overweight ratings, 12 Hold ratings, and 0 Sell ratings
- Price target range: $268-432
- Median target: $334
That’s not mild optimism – it’s conviction. Zero sell ratings among 70+ analysts is rare for any mega-cap stock.
The forward P/E compression tells the story: current 31x trailing P/E drops to 28x forward P/E. Analysts expect earnings growth to accelerate beyond current levels, bringing valuation back in line even as the stock appreciates. Also, see our dashboard on Google Stock’s Valuation for more details on the company’s valuation.
Risks: What Could Go Wrong in 2026?
- Antitrust and regulation: Regulators in the U.S. and EU have already found Google holds illegal monopolies in search and segments of ad tech, and remedies could curb default-search deals and even force divestitures. The main risk is a slow, multi‑year erosion of distribution and ad‑stack integration rather than an immediate breakup, and Google’s strong user preference likely cushions, but does not eliminate, the impact.
- AI competition: ChatGPT now has a larger active user base than Gemini, but Google’s AI Mode and Gemini are boosting query growth and feeding into an already dominant ad business, keeping search economics resilient for now. The risk is less that “AI kills search” and more that a competitor perfects AI‑native search monetization faster than Google.
- CapEx and margins: Alphabet is investing about $90–95 billion in capex for 2025, with spending likely to exceed $110 billion in 2026. Strong Services margins in the high‑30s, improving Cloud margins around 24%, and a $155 billion Cloud backlog are allowing the company to fund these investments entirely from internal cash. The underlying bet is that AI‑driven revenues will eventually outpace rising depreciation; otherwise, margins could remain structurally lower.
- Macro and ads: A 2026 recession and 10–20% cut in ad budgets would still hit Alphabet’s growth and share price, but a larger Cloud business and more subscription revenue give it slightly better downside protection than in prior cycles. History shows how the stock responds to macro stress but ultimately recovers stronger:
- Inflation shock (2022): Shares dropped 44.6% from a $150.71 peak (Nov 2021) to $83.49 (Nov 2022), far worse than the S&P 500’s 25.4% decline. The stock fully rebounded to its pre‑crisis level by Jan 2024 and has since surged to $323.64 (Nov 2025), recently trading around $305.63.
- COVID‑19 pandemic (2020): GOOG fell 30.8% from $76.33 (Feb 2020) to $52.83 (Mar 2020), similar to the S&P 500’s 33.9% drop, and recovered by July 2020.
- See our take on – How Low Can Google Stock Really Go? – for more details.
- Waymo execution risk: Google’s Other Bets segment, which includes Waymo, is losing over $1 billion per quarter, yet Waymo now delivers roughly 450,000 paid rides weekly, far ahead of rivals, making it a classic high‑burn, high‑optionality bet. The December 2025 San Francisco blackout fiasco underscores that safety, operations, and public trust could still derail the upside narrative.
Valuation: Is Google Fairly Priced for 2026?
Current state: $315 per share, 31x trailing P/E, 27-28x forward P/E, $3.9 trillion market cap.
Bull Case Scenario:
- 2026 EPS: $12.00-12.50 (if Cloud growth exceeds estimates and margins improve faster)
- Stock re-rates to 30x P/E (reflecting growth acceleration)
- Target price: $360-375 (14-19% upside)
- Plus 0.26% dividend yield
- Potential for multiple expansion if Cloud momentum continues and Waymo scales
Base Case Scenario:
- 2026 EPS: $11.47-11.50 (consensus estimates)
- P/E stays around 27-29x
- Target price: $310-335 (flat to 6% upside)
- Steady performance, not spectacular, but reasonable for a mega-cap
Bear Case Scenario:
- Antitrust remedies hit in early 2026, revenue growth slows to 7-9%
- EPS growth limited to 3-5% to $11.00-11.25
- P/E contracts to 24x on uncertainty
- Target price: $264-270 (16-18% downside)
Comparison to Peers:
Google at 27-28x forward P/E isn’t expensive relative to big tech. Given Cloud’s 50% potential growth rate and AI positioning, it’s arguably cheap.
The Bottom Line: 2026 Setup
If you’re investing in Google for 2026, you’re betting that:
- Cloud growth accelerates beyond Street estimates (50% vs consensus 35%)
- AI enhances rather than disrupts the advertising model
- Waymo becomes a legitimate business generating $750M-$1B+ revenue
- Regulatory challenges take longer to impact operations than feared
- Margin compression is temporary, not structural
The risk-reward looks favorable at current levels. At 27-28x forward earnings with multiple drivers capable of delivering 15-20% earnings growth (if Cloud and AI exceed), Google offers reasonable upside with downside protected by a fortress balance sheet, massive cash flows, and 90% search market share.
For 2026, this isn’t a moonshot play – it’s a “show me the Cloud and Waymo revenue conversion” story. The investments are made. The infrastructure’s being built. The contracts are signed ($155B Cloud backlog). Now execution matters.
But Consider Your Approach:
That said, investing in a single stock without comprehensive ongoing analysis carries inherent risks. Even thoroughly researched positions like Google face unpredictable regulatory, competitive, and execution challenges. Diversified portfolio strategies that blend large-, mid-, and small-cap stocks offer an alternative approach. Consider the Trefis Reinforced Value (RV) Portfolio, which has outperformed its all-cap stocks benchmark (combination of the S&P 500, S&P mid-cap, and Russell 2000 benchmark indices) to produce strong returns for investors. Why is that? The quarterly rebalanced mix of large-, mid-, and small-cap RV Portfolio stocks provided a responsive way to make the most of upbeat market conditions while limiting losses when markets head south, as detailed in RV Portfolio performance metrics.
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