Can Alphabet Maintain its Momentum Through 2026?

From Skepticism to Rally: The 2025 Turnaround

When Alphabet (NASDAQ: GOOG) kicked off 2025, investor sentiment was decidedly bearish. The stock was trading at a significant discount—around 14 times forward earnings at its April lows. Three major headwinds had weighed on market confidence: concerns about whether the company could establish itself as a genuine AI competitor, speculation that Google Search faced disruption from new generative AI technologies, and the looming threat of an antitrust breakup that could fundamentally reshape the business.

Yet by year’s end, Alphabet stock had surged approximately 65%, fundamentally altering the narrative. The turnaround hinged on positive resolutions across all three pain points. Gemini, the company’s generative AI model, has gained serious traction and now ranks among the leading options in the market. Google Search didn’t get disrupted—instead, it adapted by integrating AI Overviews and AI Mode, preserving its search dominance while enhancing user experience. And critically, while the antitrust judge determined that Alphabet was operating an illegal monopoly in online search, the court stopped short of forcing a breakup, allowing the company to continue largely intact despite mandated business modifications.

What Investors Should Watch in 2026

As Alphabet moves into 2026, the investment thesis has shifted. The previous valuation discount—which fueled much of 2025’s gains—has largely evaporated. Shares now trade near 30 times forward earnings, roughly in line with other mega-cap tech peers. This repricing suggests that near-term returns may follow a more measured trajectory compared to the exceptional 2025 performance.

The real question becomes whether Alphabet’s fundamentals can justify its current valuation going forward.

Core Business Stability: Google Search and Gemini must continue their impressive trajectories. These remain the financial backbone of the company, and any signs of weakness would immediately pressure the stock.

TPU Monetization: A critical development to monitor is whether Alphabet can sell its custom-designed Tensor Processing Units to external customers. Currently, all internally-produced TPUs go into Alphabet’s own data centers, which then rent capacity to cloud customers or support internal AI workloads. Industry reports suggest potential deals with Meta Platforms (NASDAQ: META) could be forthcoming. Successfully externalizing TPU sales would create a new revenue stream and potentially challenge Nvidia’s (NASDAQ: NVDA) dominance in the graphics processing units market, positioning Alphabet as a meaningful competitor in AI infrastructure.

Google Cloud Acceleration: Google Cloud has demonstrated consistent strength, delivering year-over-year revenue growth exceeding 30%. Maintaining this growth trajectory is essential for Alphabet’s overall success and will be a key metric for Wall Street in 2026.

The SpaceX Wildcard: Alphabet holds roughly a 7% stake in SpaceX, currently valued in the private markets. If SpaceX pursues its rumored IPO with a $1 trillion-plus valuation, that stake could be worth approximately $70 billion. A strategic exit could provide meaningful capital for Alphabet’s accelerating AI infrastructure investments. However, SpaceX’s IPO timeline remains uncertain, and valuations could fluctuate significantly.

The Path Forward: Realistic Expectations

Wall Street consensus anticipates 14% revenue growth for Alphabet in both 2025 and 2026, suggesting analyst confidence in mid-teens percentage growth rates. That pace would outpace the long-term S&P 500 annualized return, supporting the investment case.

However, context matters. Other major tech players—particularly Nvidia—could potentially deliver stronger outperformance in 2026. Yet Alphabet arguably presents a more balanced risk-reward profile, with stronger downside protection and more predictable execution compared to semiconductor-dependent alternatives.

The critical factor: Alphabet must execute consistently on its core search and cloud businesses while successfully monetizing its growing AI infrastructure advantages. If the company delivers on these fronts, the alphabet block of tech holdings should prove defensive and modestly rewarding for long-term shareholders. Don’t anticipate another 65% rally—but reasonable upside combined with reasonable stability makes a compelling case for 2026.