Alphabet Emerges as the Surprise AI Leader

While many of its mega-cap technology peers have seen their momentum stall in 2026, Alphabet Inc., the parent company of Google, has surged ahead. Its shares have already gained 7.7% this year, trading near $327, as the market anticipates its upcoming annual report.

The company is scheduled to release its Q4 and full-year 2025 results on February 4, 2026. Wall Street analysts are forecasting earnings per share of $2.59, representing a robust year-over-year increase of over 20%. Revenue is expected to reach $94.6 billion, a jump of nearly 16%.

These expectations follow a record-breaking performance where Alphabet surpassed $100 billion in quarterly revenue for the first time in Q3 2025.

A Multifaceted Rally

Alphabet's 65% share price appreciation over the last twelve months is supported by several key drivers:

• Proprietary AI Advancements: The success of its Gemini AI model and in-house Tensor Processing Unit (TPU) chips is unlocking new revenue streams.
• Cloud Momentum: Google Cloud is capitalizing on strong infrastructure demand, with some analysts projecting growth rates exceeding 40%.
• Consistent Profit Expansion: A track record of rising earnings, highlighted by the historic $100 billion quarter.
• Regulatory Relief: Antitrust rulings have proven less severe than initially feared.
• Shareholder Returns: A $70 billion commitment to stock buybacks and increased dividends.

Strategic Partnership Cements AI Dominance

A pivotal development occurred in mid-January 2026, when Alphabet announced a landmark partnership with Apple. The agreement will see Gemini models and Google Cloud technology powering Apple's future AI features. This deal is viewed as a significant setback for competitors OpenAI and Microsoft, solidifying Alphabet's central role in the evolving AI ecosystem.

Should investors sell immediately? Or is it worth buying Alphabet?

Operational Strength and Vertical Integration

Alphabet's financials reveal formidable operational power. The Google Services segment—encompassing advertising, subscriptions, and devices—reported an operating margin of 40% for the first nine months of 2025. Meanwhile, Google Cloud achieved a 21% margin, signaling the division's growing maturity.

This strength is bolstered by a vertically integrated strategy: DeepMind refines core AI models, proprietary TPUs reduce reliance on Nvidia, and the $4.7 billion acquisition of Intersect secures critical energy capacity for data center expansion.

Valuation and Analyst Outlook

With a forward P/E ratio of approximately 30—well above the industry average of around 18—and a PEG ratio of 1.82, the stock is considered by some observers to be fully valued following its strong rally. Despite this, institutional investors continue to show confidence.

Bank of America maintains its "Buy" rating with a price target of $370, suggesting roughly 10% further upside potential. The consensus estimate for full-year 2026 EPS is $10.58, which would equate to a substantial 32% year-over-year leap. Notably, eleven analysts have raised their estimates within the past 30 days. A combination of stable advertising trends, YouTube's strength, and cloud expansion is expected to sustain this double-digit earnings growth.