Up Over 25% This Year, Is Alphabet Stock Still a Buy?

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has been an excellent stock to own so far in 2026. It has risen around 28%, easily outperforming the S&P 500, which is up around 9.6%. The question investors have to ask now is if this run is the start of something bigger, or if this is all Alphabet has left. There are several incredible investment opportunities in the market, and nobody wants to be holding Alphabet stock for the remainder of 2026 if there is more money to be made elsewhere.

So, is Alphabet worth buying now (or holding)? Or is there a better place to park your money?

Image source: The Motley Fool.

Alphabet's AI business is heating up

Alphabet is the parent company of Google, which includes several divisions, including Google Search, YouTube, Google Cloud, Chrome, Android, and Gemini. But for most investors, there are really just two business segments to analyze: advertising and artificial intelligence (AI). Advertising is what got Alphabet to where it is today, and is still the primary way it makes money. While advertising is being affected by AI, it's still subject to the market demands of advertising availability and customer acquisition costs. Google Search accounts for the lion's share, and it rose an impressive 19% this past quarter. YouTube wasn't the greatest, as it trailed Google Search's strong revenue growth and delivered 11% growth in Q1. Still, investors need to understand that Google Search accounts for the majority of Google's revenue, so as long as it's doing great and the other segments are doing just OK, investors should be happy.

The majority of Alphabet's AI revenue is being recognized through its Google Cloud business unit. This division is making money through the expansion of its cloud computing resources and by selling its custom-designed AI chips to external clients. Both of these added up to Google Cloud having a great quarter, with revenue rising 63% year over year. Furthermore, its operating margin rose to 33%, a huge gain from last year's 18% margin.

Overall, Alphabet's revenue rose 22% last quarter -- its best quarter since 2021.

Data by YCharts.

However, the market has gotten extremely excited about this rise, and now Alphabet carries an expensive price tag.

Data by YCharts.

From an operating-cash-flow standpoint, Alphabet is by far the most expansive it has been in the past decade. While there are countless companies valued at 30 times operating cash flow or greater, this is new territory for Alphabet. As a result, I think its upside may be limited over the next few quarters. However, if it continues to accelerate its revenue growth rate, this figure could move far higher.

I think there are better AI picks than Alphabet right now due to its high price, but Alphabet is still a great stock to hold on to as well, as it will be one of the top long-term beneficiaries of the AI build-out.

Keithen Drury has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.