In one form or another, most investors already own Alphabet (GOOG). As one of the world’s largest publicly traded companies, it ranks as a dominant holding in nearly every major index and ETF. Yet despite its size and widespread ownership, Alphabet remains a compelling addition to any investors portfolio. Supported by fresh earnings estimate revisions,…
In one form or another, most investors already own Alphabet (GOOG). As one of the world’s largest publicly traded companies, it ranks as a dominant holding in nearly every major index and ETF. Yet despite its size and widespread ownership, Alphabet remains a compelling addition to any investors portfolio.
Supported by fresh earnings estimate revisions, strong price momentum, and a leading position across digital advertising, cloud computing, and artificial intelligence, Alphabet continues to offer an attractive combination of quality, growth, and reasonable valuation. That’s why it remains a core long-term holding and earns today’s Bull of the Day.
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Alphabet Earnings Momentum Accelerates
Alphabet’s most recent earnings report was a reminder that this is still one of the highest-quality businesses in the world. The company generated $109.9 billion in first-quarter revenue, up 22% from the prior year, while operating income rose 30% and operating margin expanded to 36.1%. Google Cloud was a major standout, with revenue surging 63% to $20.0 billion, as AI-driven enterprise demand continues to accelerate.
That level of growth and margin expansion is impressive for any company, but it is especially notable for a business already operating at Alphabet’s scale. Investors may assume that mega-cap technology companies eventually lose the ability to compound at attractive rates, but Alphabet continues to prove otherwise.
Earnings were even stronger, with diluted EPS rising 82% year over year to $5.11. While part of that jump was helped by investment gains, the core operating performance was still excellent.
For a company that has long been viewed as one of the most reliable earnings compounders in the market, the latest report reinforces the case that Alphabet still has room to deliver upside. This position has been reiterated by modest but recent earnings upgrades, earning it a Zacks Rank #1 (Strong Buy) rating.
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Search Remains the Core Profit Engine
The biggest concern around Alphabet over the last two years has been whether AI would disrupt Google Search. That concern is understandable. Search is one of the greatest business models ever created, and any credible threat to that profit engine deserves attention.
But so far, Alphabet appears to be adapting rather than fading. Search growth has not merely held up under the rise of AI but accelerated. Google Search & other revenue grew roughly 10% year over year in Q1 2025, then improved to 12%, 15%, 17% and finally 19% in Q1 2026.
The reason is that Google still has deeply entrenched distribution, user habit, advertiser relationships, data, infrastructure and product depth that few companies can match. Even if the search interface changes over time, Alphabet remains one of the best-positioned companies to monetize that shift.
The AI transition may pressure parts of the legacy search model, but it also gives Google a chance to deepen engagement, improve ads and expand the number of use cases tied to its ecosystem. In other words, AI appears to not be a risk for Alphabet, but a core driver of growth.
GOOG Stock Still Looks Reasonably Valued
Alphabet is not as cheap as it was last year, but the stock still looks reasonably valued relative to its mega-cap peers. GOOG trades at roughly 24.8x forward earnings, below Apple at 36.1x and Amazon at 31.7x, while sitting in the same general range as Nvidia and Meta.
That valuation looks fair, especially as Alphabet’s fundamentals continue to improve. Search growth has accelerated, Google Cloud is becoming a larger profit contributor, and the company continues to generate substantial free cash flow. With a mid-teens 3-5 year EPS growth forecast, GOOG also screens reasonably well on a PEG basis.
Alphabet is not the cheapest Magnificent Seven stock, as Meta and Microsoft look somewhat better on valuation-to-growth, while Nvidia remains in a category of its own if its growth forecasts hold. But compared with Apple and Amazon, Alphabet offers a very attractive balance of valuation, durability and expected earnings growth.
The stock has re-rated higher from its early-2025 lows, reflecting its AI and hardware integration, but it still does not look stretched. Investors are paying a market-leader multiple, not a perfection multiple, for one of the strongest business models in technology.
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Should Investors Buy Shares in GOOG Stock?
Alphabet is not an undiscovered stock, and that is not the point. The point is that even after years of massive gains, Alphabet remains one of the best businesses in the world and still offers a compelling setup for investors.
The company has dominant core assets, accelerating Search growth, rising Google Cloud profitability, major AI optionality, strong earnings momentum and a valuation that remains reasonable relative to its peer group. The biggest concern today is whether Alphabet and the rest of mega-cap tech are overextending themselves in the AI investment cycle. The company is spending aggressively on data centers, chips and infrastructure, and investors will eventually need to see those investments translate into durable revenue growth, stronger margins and higher earnings power.
For now, Alphabet’s core business remains strong, and the company appears to be evolving with the AI cycle rather than being displaced by it. For investors looking for a high-quality technology leader with multiple long-term growth drivers, GOOG remains one of the most attractive names in the market.
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This article originally published on Zacks Investment Research (zacks.com).
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