Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) is positioning itself as a major contender in the artificial intelligence (AI) space, beyond its established dominance in search and cloud services. While Nvidia (NASDAQ:NVDA) has captured headlines for its leadership in AI chips, Google has quietly developed custom silicon for over a decade, a move that could reshape cloud computing and drive GOOGL stock outlook higher.
The tech giant recently unveiled Ironwood, the seventh generation of its Tensor Processing Unit (TPU). Google claims Ironwood is over four times faster than its predecessor, handling massive AI workloads—from training large models to powering real-time chatbots and AI agents.
Unlike Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT), which entered the custom chip arena more recently, Google has been deploying TPUs in large volumes since 2018. These application-specific integrated circuits provide crucial efficiency advantages, particularly at a time when power consumption is poised to become the primary bottleneck in AI infrastructure.
Strong Q3 2025 Performance
Alphabet reported a record $102.3 billion in quarterly revenue in Q3 2025, marking a 16% year-over-year (YoY) increase, fueled by AI investments that drove growth across Search, YouTube advertising, subscriptions, and Google Cloud. Revenue has doubled over the past five years, signaling a successful pivot to the generative AI era while diversifying beyond search advertising.
Search and advertising revenue grew 15% to $56.6 billion, led by retail and financial verticals. Management noted that AI innovations, including AI Overviews and AI Mode, are boosting search query volume and commercial activity. The Gemini app now serves over 650 million monthly active users, while AI Mode has already attracted 75 million daily active users across 40 languages.
YouTube ad revenue climbed 15% to $10.3 billion, with Shorts generating higher revenue per watch hour than traditional in-stream ads. Subscriptions, platforms, and devices revenue rose 21% to $12.9 billion, with YouTube Premium and Google One surpassing 300 million paid users.
Google Cloud continues to accelerate, with revenue increasing 34% to $15.2 billion and operating margin expanding to 23.7%. The cloud backlog grew 82% YoY to $155 billion, reflecting high demand for AI-driven enterprise solutions. Nearly 70% of existing cloud clients now utilize AI products, while revenue from generative AI solutions rose over 200% YoY.
GOOGL Stock Valuation and Potential
Alphabet’s custom TPU portfolio, led by the Ironwood chip, continues attracting top AI labs, with nine of the top ten selecting Google Cloud. The company also expanded its partnership with Anthropic, a deal valued in the tens of billions, and plans to bring over a gigawatt of AI compute capacity online in 2026.
GOOGL stock currently carries a market capitalization of $3.37 trillion and has risen more than 50% in the past year. Analysts project revenue growth from $350 billion in 2024 to $631 billion in 2029, with adjusted earnings expected to climb from $8.04 to $17.23 per share over the same period.
With a forward price-to-earnings (P/E) ratio of 26.3x, above its 10-year average of 23.8x, GOOGL stock could gain over 40% if it reverts to historical valuation norms. Out of 56 analysts covering the company, 42 rate it a “Strong Buy,” five a “Moderate Buy,” and nine a “Hold.” The average price target of $314 suggests upside potential from the current price near $290.
Conclusion: GOOGL Stock Outlook Remains Positive
With its AI innovations, custom TPU technology, and rapidly expanding cloud business, Alphabet (NASDAQ:GOOGL) is well-positioned for growth through 2026. Investors monitoring GOOGL stock outlook should consider its combination of technological leadership and strong financial performance as key factors for long-term potential gains.
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