Google's stock was surging heading into 2026, but it's still reasonably priced for excellent return potential.
The company's largest businesses, including search ads and cloud computing, are delivering robust growth for shareholders.
Wall Street analysts expect strong growth to continue over the long term.
The share price of Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) surged to new highs in 2025. Some investors might be hesitant to buy a stock after a 78% rise over the last six months, but the stock still trades at a reasonable valuation. The stock's forward price-to-earnings multiple of 29 is higher than a year ago, but it appears justified given Google's advantages in artificial intelligence (AI).
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Google has built a competitive advantage in the most disruptive technology ever created. The company has spent years investing billions in chips and data centers for AI training. Its AI chips are a strong draw for customers in Google Cloud seeking an optimal balance of compute performance and cost. Revenue from cloud services surged 34% year over year in the third quarter.
Moreover, AI search features are boosting user engagement in the company's largest business, Google Search, which grew advertising revenue 14% year over year last quarter.
While dependency on advertising can lead to weaker growth during a recession, Google is building multiple revenue streams across subscriptions (e.g., Google One and YouTube Premium), products, cloud services, and potentially its Waymo self-driving car business. Analysts expect its earnings per share to grow at a 15% annualized rate over the next several years, which should deliver market-beating returns for shareholders.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.