Shares of Alphabet (GOOGL 1.38%) (GOOG 1.39%) slid despite the company seeing its revenue growth accelerate when it reported its Q4 results. The stock is still up more than 50% over the past year, as of this writing.
Let's take a closer look at the company's Q4 results, prospects, and why the stock is a buy.
Revenue surges
Google Cloud, Alphabet's cloud computing unit, once again led the way for the artificial intelligence (AI) leader. Revenue growth accelerated to 48% (versus 34% growth in Q3 and 32% growth in Q2) in the quarter to $17.7 billion, while segment operating income skyrocketed from $2.1 billion a year ago to $5.3 billion. Its backlog, meanwhile, climbed 55% to $240 billion.
The company shocked the investment world when it set a capital expenditure (capex) budget of between $175 billion and $185 billion for 2026, up from $91 billion in 2025. Alphabet said it will also be Apple's preferred cloud computing provider and help the iPhone maker create its next generation of AI models.
NASDAQ: GOOGL
Key Data Points
Google Search revenue jumped 17% to $63.1 billion, a continued acceleration from the 15% growth in Q3, the 12% growth in Q2, and the 10% growth in Q1. The company said search queries hit a record in Q4, and that AI is driving usage and the types of searches people conduct, without cannibalizing traditional search.
YouTube also continues to perform well, with ad revenue rising 9% to $11.4 billion. YouTube, along with Google One (cloud storage) and Music, also helped drive a 17% increase in subscription and device revenue to $13.6 billion. Meanwhile, Alphabet's Waymo robotaxi just opened its sixth market in Miami and continues to expand. It also just raised $16 billion for its robotaxi subsidiary at a $126 billion valuation.
Overall, Alphabet's total quarterly revenue rose by 18% to $113.8 billion. Earnings per share jumped by 31% year over year to $2.82. The results topped analyst consensus estimates (as compiled by LSEG), which were looking for EPS of $2.63 on revenue of $111.4 billion.
Image source: Getty Images.
Is Alphabet stock still a buy?
Alphabet delivered outstanding results and showed that it is going all in to win the AI race. Given that its custom AI chips, called Tensor Processing Units (TPUs), give it a cost advantage, it makes sense for it to push all in while it has this edge. The company is getting strong returns on its capex spending, both through Google Cloud and other parts of its business, such as Search. Meanwhile, it has once again shown that AI is not disrupting its search business but instead helping drive growth.
The stock trades at a forward price-to-earnings ratio (P/E) of around 29 times 2026 analyst estimates and a price/earnings-to-growth (PEG) ratio of about 0.7 times (with PEGs below 1 generally considered undervalued). That's a reasonable valuation for what is one of the top AI stocks with a growing cost advantage that is hitting on all cylinders.
As such, I'd still be a buyer of the stock and think it will be a top megacap performer in 2026.
