Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) delivered an impressive performance in 2025, rising roughly 66% and outperforming many of its so-called Magnificent Seven peers. As investors look ahead, the key question is whether Alphabet stock 2026 still offers attractive upside after such a strong run.
The rally has been fueled largely by renewed confidence in Google’s artificial intelligence strategy. With AI now at the center of Alphabet’s long-term vision, the company appears better positioned to defend its core businesses while unlocking new growth opportunities.
AI Strategy Reinforces Alphabet’s Competitive Edge
A major driver behind the strength in Alphabet stock is the company’s progress in AI development and deployment. The launch of Gemini 3 marked a turning point for investor sentiment, easing fears that Google was losing ground to competitors. Instead, Alphabet has demonstrated that it can innovate at scale while integrating AI across its ecosystem.
AI is no longer confined to experimental products. It is increasingly embedded in Search, advertising, productivity tools, and enterprise offerings. This broad integration strengthens Alphabet’s moat by improving user engagement and enhancing monetization across multiple platforms.
Hardware and TPUs Open New Revenue Streams
Beyond software, hardware has emerged as an important growth lever. Alphabet’s custom Tensor Processing Units (TPUs) are seeing rising demand as enterprises and AI developers seek alternatives to traditional GPUs. In October, Alphabet announced a major agreement with Anthropic, granting access to up to one million TPUs in a multi-billion-dollar deal.
There have also been reports that Alphabet could sell TPUs to Meta Platforms (NASDAQ:META). If confirmed, this would mark a meaningful expansion of Alphabet’s AI monetization strategy, positioning the company as a key infrastructure provider in the AI arms race. For investors evaluating Alphabet stock 2026, this diversification beyond advertising is an important positive.
AI-Driven Momentum Heading Into 2026
The momentum built in 2025 appears set to carry into 2026, with AI acting as a catalyst across both Search and Cloud. In Search, features like AI Overviews and AI Mode are driving higher engagement while preserving strong advertising economics. Rather than disrupting Google’s core business, AI is enhancing it.
Google Cloud remains another standout. The segment benefits from an AI-optimized stack that includes advanced models and custom TPUs. In the third quarter, Cloud revenue increased 34% year over year to $15.2 billion, with Google Cloud Platform growing even faster. Enterprise AI products are now generating billions in quarterly revenue, underscoring the scalability of the business.
Expanding Backlog and Enterprise Demand
Enterprise adoption continues to accelerate. The number of new Google Cloud Platform customers rose nearly 34% year over year in the third quarter, while deal sizes are increasing. Alphabet has signed more contracts exceeding $1 billion in the first nine months of the year than in the prior two years combined.
Customer depth is also improving. More than 70% of existing Cloud customers are already using AI products, creating strong cross-selling opportunities and higher lifetime value. To meet demand, Alphabet is investing heavily in TPU capacity, while its Cloud backlog surged 82% year over year to $155 billion. This backlog provides strong revenue visibility heading into 2026.
Is Alphabet Stock 2026 Still a Buy?
Alphabet’s AI-driven growth engine, expanding enterprise relationships, and growing backlog suggest the company is well positioned for continued success. While the stock is no longer cheap after its rally, Wall Street remains optimistic, with Google maintaining a “Strong Buy” consensus rating.
For long-term investors, Alphabet stock offers exposure to one of the most diversified and scalable AI platforms in the market, making it a compelling candidate for those seeking durable growth in the years ahead.
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