Alphabet's Cloud Revenue Soars 34%, Outpacing Microsoft
Written by Emily J. Thompson, Senior Investment Analyst
Updated: Dec 30 2025
0mins
Should l Buy GOOGL?
Source: Fool
- Cloud Growth: Alphabet's Google Cloud achieved a 34% revenue increase last quarter, driving an 84% surge in operating income, indicating that the company's strong performance in cloud computing will further solidify its market position.
- AI Technology Advantage: Alphabet's custom AI chips, known as TPUs, provide a significant cost advantage, placing it ahead in the competitive AI services landscape, especially with substantial orders from Anthropic enhancing its market competitiveness.
- Product Integration: By incorporating top-tier language models like Gemini into its products, Alphabet not only enhances product flexibility but also creates diversified revenue streams, which are expected to drive sustained growth in the future.
- Market Outlook: Although Alphabet's forward P/E ratio stands at 28, slightly lower than Microsoft's 30, its comprehensive AI tech stack and cloud growth potential position it for stronger stock performance in 2026, particularly if search revenue accelerates.
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Analyst Views on GOOGL
Wall Street analysts forecast GOOGL stock price to rise over the next 12 months. According to Wall Street analysts, the average 1-year price target for GOOGL is 338.25 USD with a low forecast of 279.00 USD and a high forecast of 390.00 USD. However, analyst price targets are subjective and often lag stock prices, so investors should focus on the objective reasons behind analyst rating changes, which better reflect the company's fundamentals.
34 Analyst Rating
27 Buy
7 Hold
0 Sell
Strong Buy
Current: 331.250
Low
279.00
Averages
338.25
High
390.00
Current: 331.250
Low
279.00
Averages
338.25
High
390.00
About GOOGL
Alphabet Inc. is a holding company. The Company's segments include Google Services, Google Cloud, and Other Bets. The Google Services segment includes products and services such as ads, Android, Chrome, devices, Google Maps, Google Play, Search, and YouTube. The Google Cloud segment includes infrastructure and platform services, collaboration tools, and other services for enterprise customers. Its Other Bets segment is engaged in the sale of healthcare-related services and Internet services. Its Google Cloud provides enterprise-ready cloud services, including Google Cloud Platform and Google Workspace. Google Cloud Platform provides access to solutions such as artificial intelligence (AI) offerings, including its AI infrastructure, Vertex AI platform, and Gemini for Google Cloud; cybersecurity, and data and analytics. Google Workspace includes cloud-based communication and collaboration tools for enterprises, such as Calendar, Gmail, Docs, Drive, and Meet.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Alphabet Plans Significant Increase in AI Investments
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- Surge in Trading Volume: Trading volume reached 87.1 million shares, about 136% above the three-month average of 36.8 million shares, reflecting heightened investor interest in the company's future prospects.
- Earnings Beat Expectations: In Q4, Alphabet reported sales and earnings per share growth of 18% and 31%, respectively, surpassing Wall Street's consensus, with Google Search and YouTube showing steady growth rates of 17% and 9% each.
- Cloud Business Highlight: The cloud backlog surged 55% sequentially, more than doubling from Q4 2024, indicating strong demand in the cloud services sector, while management's confidence in AI-related spending continues to grow.
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- Capital Expenditure Plans: Amazon plans to invest $200 billion in capital expenditures in 2025, primarily for AWS and AI workloads, which has raised skepticism among investors; however, this move underscores the company's commitment to maintaining its market leadership.
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- Cash Flow Situation: Despite generating $139.5 billion in operating cash flow in 2025, the anticipated $200 billion capital expenditure is expected to lead to negative free cash flow in 2026, yet the company continues to execute strongly, with quarterly revenue rising 14% to $213.4 billion.
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- Strong Cloud Demand: Google anticipates capital expenditures of $180 billion in 2026, primarily for servers and data centers, underscoring sustained demand for AI solutions, positioning Nvidia as a key beneficiary.
- Solid Market Share: Nvidia holds a commanding 92% share of the data center GPU market, with its four largest customers (Microsoft, Meta, Amazon, and Google) accounting for 40% of its sales, highlighting the company's robust competitive edge in AI.
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- Hardware Competitive Advantage: Alphabet's TPU chip serves as an alternative to Nvidia's GPUs and is being extensively utilized by Anthropic, which is likely to create additional hardware demand for Alphabet and further solidify its market position.
- Strong Financial Performance: Alphabet's revenue is projected to exceed $400 billion in 2025, reflecting a 15% year-over-year increase, while net income is expected to rise by 32% to $132.1 billion, showcasing its profitability and leadership in the AI sector.
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- Collaboration with AI: Amodei highlights that AI can enhance job quality, suggesting that the combination of humans and AI creates more meaningful, challenging, and high-productivity work, reflecting the positive role of AI in the workplace.
- Changing Hiring Standards: Anthropic prioritizes human traits such as communication skills, emotional intelligence, curiosity, and compassion in hiring, demonstrating the company's focus on these unique abilities and indicating a future workplace increasingly reliant on them.
- Potential Risks of AI: Despite the growing influence of AI, experts warn that heavy reliance on it could weaken human skills, leading to declines in critical thinking abilities, underscoring the importance of maintaining human capabilities amid technological advancements.
See More
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- Stock Price Fluctuation: Alphabet's stock closed at $331.25, down 0.54%, as investors assessed the company's plan to increase AI capital expenditures to approximately $180 billion by 2026, indicating market concerns over future cash flow and AI growth.
- Surge in Trading Volume: Trading volume reached 87.1 million shares, about 136% above the three-month average of 36.8 million shares, reflecting heightened investor interest in the company's future prospects.
- Earnings Beat Expectations: In Q4, Alphabet reported sales and earnings per share growth of 18% and 31%, respectively, surpassing Wall Street's consensus, with Google Search and YouTube showing steady growth rates of 17% and 9% each.
- Cloud Business Highlight: The cloud backlog surged 55% sequentially, more than doubling from Q4 2024, indicating strong demand in the cloud services sector, while management's confidence in AI-related spending continues to grow.
See More
Analysis of Investment Prospects in IonQ Quantum Computing
- Investment Return Potential: A $5,000 investment in Amazon in early 2003 would now be worth approximately $1.25 million, illustrating the wealth-building potential of investing in emerging industries, with IonQ as a leading small player in quantum computing hoping to achieve similar returns.
- Technological Breakthroughs and Market Competition: IonQ achieved 99.99% 2-qubit gate fidelity last year, representing a 10 billion times improvement over past standards, and despite competition from tech giants like Alphabet and IBM, IonQ's advancements in quantum computing technology remain significant.
- Financial Status and Profitability Challenges: IonQ reported $68 million in revenue for the first nine months of 2025, a 117% increase year-over-year, yet it faces $406 million in operating losses, highlighting severe profitability challenges, and with less than $1.1 billion in liquidity, it may need to dilute shares or incur debt to sustain operations.
- Investment Risk Assessment: For a $5,000 investment to grow to $1 million, IonQ's market cap must increase from $12.5 billion to $2.5 trillion; while this target is below Alphabet's $4 trillion market cap, IonQ's financial losses and market competition significantly diminish the likelihood of achieving such a goal.
See More
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- Cloud Growth: Amazon's AWS achieved a 24% year-over-year growth in 2025, adding $21.2 billion in revenue, although this was behind Google Cloud's 36% and Microsoft's Azure's 39%, indicating its sustained leadership in the cloud market despite competitive pressures.
- Capital Expenditure Plans: Amazon plans to invest $200 billion in capital expenditures in 2025, primarily for AWS and AI workloads, which has raised skepticism among investors; however, this move underscores the company's commitment to maintaining its market leadership.
- Profitability Comparison: AWS's operating income reached $45.6 billion in 2025, significantly exceeding Google Cloud's $13.9 billion, highlighting Amazon's profitability advantage in the cloud services sector, even as its overall market share declines.
- Cash Flow Situation: Despite generating $139.5 billion in operating cash flow in 2025, the anticipated $200 billion capital expenditure is expected to lead to negative free cash flow in 2026, yet the company continues to execute strongly, with quarterly revenue rising 14% to $213.4 billion.
See More
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- Surge in Capital Expenditure: Microsoft invested $88.2 billion in AI in 2025 and is on track to exceed that in 2026, indicating strong commitment to AI demand, which will further drive Nvidia's GPU requirements.
- Strong Cloud Demand: Google anticipates capital expenditures of $180 billion in 2026, primarily for servers and data centers, underscoring sustained demand for AI solutions, positioning Nvidia as a key beneficiary.
- Solid Market Share: Nvidia holds a commanding 92% share of the data center GPU market, with its four largest customers (Microsoft, Meta, Amazon, and Google) accounting for 40% of its sales, highlighting the company's robust competitive edge in AI.
- Optimistic Earnings Outlook: Nvidia expects a 65% year-over-year revenue growth for Q4 of fiscal 2026, up from 62% in Q3, and if actual results exceed expectations, it will further boost investor confidence and drive stock price appreciation.
See More
Alphabet's AI Market Share Rapidly Expanding
- Market Share Growth: Alphabet's Gemini AI is rapidly capturing market share, increasing from 7% in 2022 to 21% in 2023, and is expected to surpass ChatGPT this year, demonstrating strong competitiveness in the generative AI space.
- Hardware Competitive Advantage: Alphabet's TPU chip serves as an alternative to Nvidia's GPUs and is being extensively utilized by Anthropic, which is likely to create additional hardware demand for Alphabet and further solidify its market position.
- Strong Financial Performance: Alphabet's revenue is projected to exceed $400 billion in 2025, reflecting a 15% year-over-year increase, while net income is expected to rise by 32% to $132.1 billion, showcasing its profitability and leadership in the AI sector.
- Significant Capital Expenditure Increase: Alphabet plans to double its capital expenditures to between $175 billion and $185 billion in 2026, indicating a strong commitment to long-term investments in AI, which is expected to further drive market expansion and technological innovation.
See More
AI Reshapes Job Market, Elevates Human Skills Importance
- Necessity of Human Skills: Daniela Amodei, co-founder of AI startup Anthropic, emphasizes that skills like communication, empathy, and critical thinking will be crucial for career success, indicating that AI will augment rather than replace human jobs.
- Collaboration with AI: Amodei highlights that AI can enhance job quality, suggesting that the combination of humans and AI creates more meaningful, challenging, and high-productivity work, reflecting the positive role of AI in the workplace.
- Changing Hiring Standards: Anthropic prioritizes human traits such as communication skills, emotional intelligence, curiosity, and compassion in hiring, demonstrating the company's focus on these unique abilities and indicating a future workplace increasingly reliant on them.
- Potential Risks of AI: Despite the growing influence of AI, experts warn that heavy reliance on it could weaken human skills, leading to declines in critical thinking abilities, underscoring the importance of maintaining human capabilities amid technological advancements.
See More
