Alphabet's stock is the hottest in Big Tech, raising the bar for earnings

By Christine Ji

Alphabet's stock has rallied 80% in the last six months on AI enthusiasm. Here's how the Google parent can keep the momentum going.

Alphabet's capital expenditures could reach $130 billion in 2026, some analysts suggest.

Alphabet has earned a reputation as an artificial-intelligence winner. That means expectations are high heading into the company's fourth-quarter earnings report.

When Alphabet posts its results on Wednesday afternoon, investors will be focused on AI adoption and monetization, as well as the company's growth trajectory in the cloud.

The results will put the Google parent company's strong recent stock performance to the test. Shares of Alphabet (GOOGL) (GOOG) have risen over 80% in the last six months as investors have cheered the company's full-stack AI strategy, which ranges from proprietary chips to its Gemini large language model. Not only was Alphabet's stock the best in the group known as the Magnificent Seven last year, but it's also leading the way this year with a 10% gain.

For Alphabet to keep its top position, it will need to show accelerating usage of Gemini as well as continued strength in its search and Google Cloud business. After Meta Platforms (META) beat earnings expectations last week, Bank of America analyst Justin Post believes the bar is set high for Alphabet's own search and advertising business.

Analysts polled by FactSet are anticipating $111.3 billion in revenue and $2.63 in earnings per share for the quarter.

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David Miller, CIO and portfolio manager at Catalyst Funds, wrote in a note last week that he expects Google to continue demonstrating that AI is enhancing its search business. "There has been no share loss," Miller said. As of mid-2025, AI Overviews had 2 billion monthly active users, and investors will be looking for more indicators of growing AI adoption, especially after the launch of Gemini 3 in November of last year.

The "biggest potential to drive upside and multiple expansion in 2026, in our view, is AI driven benefits to search monetization, and optimism on Agentic AI rollout," Post wrote in a note last week. AI agents have received much buzz in early 2026 with the introduction of tools such as Claude Cowork and Moltbot. For Google and competitors, Post believes the big opportunity lies in agentic e-commerce offerings.

Additionally, Miller is keeping an eye on YouTube's performance, especially around the monetization of YouTube Shorts. On the last earnings call, Alphabet CEO Sundar Pichai said that YouTube Shorts now earns more revenue per watch hour than traditional in-stream video.

Read: Why Alphabet and Meta investors shouldn't sweat ChatGPT's ad launch - for now

And Google Cloud revenues remain a key focus, as Alphabet will need to show that it's growing both revenue and its pipeline of future deals. Wall Street is anticipating 35% growth in Cloud for the fourth quarter. The consequences of slower-than-hoped-for cloud growth are severe - Microsoft (MSFT) suffered a historic $357 billion market-cap decline last week after Azure growth failed to live up to bullish expectations.

For the Magnificent Seven hyperscalers building AI infrastructure, the question is not whether demand exists, but rather whether the companies have enough available capacity to meet customer needs, and Post is confident that Google has been accelerating its capacity growth.

The flip side of that could be higher capital expenditures for Alphabet. The FactSet consensus currently anticipates $116 billion in capex for 2026, but BNP Paribas analyst Nick Jones wrote in a January note that "expectations may be as high as $125 billion to $130 billion."

-Christine Ji

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02-03-26 1210ET