GOOGL Search revenue grew 19% to $60B in Q1 2026, proving AI chatbots enhanced rather than cannibalized Google's core business.
Google Cloud grew 63% with a $460B backlog and GenAI revenue up 800%, validating the company's massive infrastructure spending.
Alphabet combines Search dominance, hyperscale cloud growth, and YouTube's $9.9B quarterly ad revenue at just 25 times forward earnings.
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I keep hitting the buy button on Alphabet (NASDAQ:GOOGL), and the reason is uncomplicated: the loudest bear case against this stock has already collapsed under its own weight, and I do not think the tape has fully absorbed that yet.
Two years back the consensus fear was that ChatGPT and its imitators would gut Google Search. My conviction rests on what actually printed. In the Q1 2026 report, Search & other revenue landed at $60.399 billion, growing 19% year over year, with Sundar Pichai flagging "queries at an all time high". AI experiences pulled users deeper into Search. That is the whole ballgame for me.
First, Search is compounding on the very technology that was supposed to kill it. Pichai told analysts that "since upgrading AI overviews and AI Mode to Gemini 3, we've reduced the cost of core AI responses by more than 30%". Query volume up, unit costs down. That is the signature of a durable business.
Second, Google Cloud is behaving like a rocket with a receipt. Cloud revenue hit $20.028 billion, up 63%, with backlog nearly doubling sequentially to over $460 billion. Cloud operating income tripled to $6.6 billion, and Cloud operating margin climbed to 32.9% (up from 17.8% in Q1 2025). CFO Anat Ashkenazi added that "revenue from products built on our GenAI models grew nearly 800% year-over-year".
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Third, the machine is throwing off cash and returning it. FY2025 revenue crossed $402.84B for the first time, EPS came in at $10.81, and management raised the dividend 5% to $0.22 per share. Consolidated operating margin sits at 36.1% with return on equity at 38.9%.
The reflex alternatives are Microsoft for AI cloud and Meta for digital advertising. My money keeps landing on Alphabet because I can point to the exact number that decides it. Alphabet trades at a forward P/E of 25 while its cloud arm grew 63%, its ad-supported search grew 19%, and consolidated revenue grew 21.8%. Meta does not run a hyperscale cloud. Microsoft does not own a Search franchise or YouTube, where ads clocked $9.883 billion in the quarter. Alphabet is the only name on my screen combining that consumer moat with that enterprise growth at that multiple.
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