GOOGL Rises 79% in a Year on AI Push: Will the Rally Continue in 2026?

Alphabet GOOGL 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 and Amazon AMZN. 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 PushGOOGL shares have beaten peers like Microsoft, Apple AAPL 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 ProspectsAlphabet’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 StockThe 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. QuoteThe 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: RichA 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 2026Alphabet’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.Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.See Top Quantum Stocks Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Amazon.com, Inc. (AMZN): Free Stock Analysis Report Apple Inc. (AAPL): Free Stock Analysis Report Microsoft Corporation (MSFT): Free Stock Analysis Report Alphabet Inc. (GOOGL): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks