When it comes to leading internet companies, there might be no business that's more worthy of recognition than Alphabet (GOOGL 1.66%) (GOOG 1.68%). The Silicon Valley success story has ascended to become a thriving global enterprise, with a market cap measured in the trillions of dollars.
This tech stock has crushed it for shareholders in the past. But is Alphabet a buy right now?
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Ongoing growth and AI leadership
In 2025, Alphabet reported 15% year-over-year revenue growth to $403 billion. This is extremely impressive for a business of such a massive scale.
But it's also noteworthy just how broad-based the gains were. Google Search posted a 13% top-line increase, while YouTube's ad revenue was up 12%.
Google Cloud is the star of the show, registering a monster 48% sales gain in the fourth quarter (ended Dec. 31, 2025). This segment is experiencing incredible demand from customers that want to work with the latest artificial intelligence (AI) tools.
"Nearly 75% of Google Cloud customers have used our vertically optimized AI, from chips, to models, to AI platforms, and enterprise AI agents," CEO Sundar Pichai said on the Q4 2025 earnings call.
All this spending can make investors nervous
The company's capital expenditures (capex) totaled $91 billion last year. This was up considerably from $53 billion in 2024.
Alphabet is not letting up. It plans to have capex of between $175 billion and $180 billion this year. The business wants to keep building the necessary computing infrastructure to satisfy Google Cloud's AI-related demand, and develop AI capabilities for its widely adopted user-facing apps and for advertising customers.
Investors are certainly jittery about all this spending, even though Pichai and his leadership team believe the capital outlays are necessary to stay ahead of the curve. The return on investment is a big question mark. Time will tell if the huge capex is a waste of money or the right financial decision.
NASDAQ: GOOGL
Key Data Points
Earnings and valuation can be the return driver
Investors should consider two key variables. The first part of the equation is the trajectory of profits. Alphabet's earnings per share (EPS) are projected to increase at a compound annual rate of 12.7% between 2025 and 2028. I believe there will be many years of double-digit gains in the future.
Investors should also pay attention to valuation. Right now, this stock trades at a price-to-earnings (P/E) ratio of 28.5. Looking out five years from now, it's not unreasonable to think that Alphabet shares can command a P/E multiple of 30, especially since this is one of the most dominant companies out there. The valuation tailwind adds an estimated 5% upside, perhaps higher if the market becomes more bullish.
Taken together, the potential for EPS growth and the starting P/E ratio create the perfect recipe for this to be a winning investment.
