Is Alphabet a Buy Amid Soaring Q1 Profits on AI Cloud Growth?

The undisputed global leader of Internet search engine and artificial intelligence-powered cloud giant Alphabet Inc. GOOGL came up with quarterly adjusted earnings of $5.11 per share, beating the Zacks Consensus Estimate by 93.6%. First-quarter 2026 profits soared 82% year over year. The company posted quarterly consolidated revenues of $109.9 billion, up 21.8% year over year.Alphabet is significantly emphasizing its AI capabilities to boost its search engine advertising business and cloud computing business. Alphabet raised its 2026 capital expenditure target to the range of $180-190 billion. Management said that 2027 capex will further increase significantly.AI-Powered Cloud Computing BusinessGoogle Cloud has solidified its position as a major provider in the highly competitive cloud infrastructure market against Amazon.com Inc.’s AMZN cloud arm, Amazon Web Services, and Microsoft Corp.’s MSFT Azure.Alphabet's Google Cloud revenues rose 63% year over year to $20 billion in the last quarter, outpacing the rest of the business. GOOGL's Cloud operating income tripled to $6.6 billion, with margins near 33%. Management attributed the acceleration to strong performance across Google Cloud Platform, enterprise AI solutions, enterprise AI infrastructure and core services such as cybersecurity and data analytics. The quarter also featured a sharp step-up in contracted demand, with Cloud backlog reaching roughly $462 billion at quarter-end. GOOGL is cashing in on the increasing demand for Large Language Models with its most powerful AI model called Gemini.GOOGL reported that Gemini Enterprise is seeing massive momentum, with 40% growth quarter over quarter for paid monthly active users. The Gamini platform offers AI-powered solutions like enterprise agents, workplace automation tools, developer assistants, and cloud services.Advantages of GOOGL Cloud Alphabet continues to benefit from investments in infrastructure, security, data management and analytics, along with its partnership with NVIDIA Corp. NVDA and a growing global footprint of cloud regions and availability zones. The company also plans to begin delivering tensor processing units (TPUs) to select customers in their own data centers, with most related revenues expected in 2027, which expands the addressable market over time.Google Cloud’s differentiated full-stack AI approach strengthens Alphabet’s competitive positioning. The company integrates its own infrastructure (TPUs and GPUs), proprietary AI models (Gemini), and data platforms (like BigQuery) into a unified offering. This vertical integration enhances performance, lowers costs and creates higher switching barriers for enterprise customers. As a result, Alphabet is winning larger deals, accelerating customer acquisition, and deepening relationships, all of which reinforce long-term growth potential.Solid Earnings Estimate Revisions for GOOGL StockFor 2026, the Zacks Consensus Estimate currently shows revenues of $421.79 billion, suggesting an improvement of 23% year over year and earnings per share of $14.01, indicating an increase of 29.6% year over year. The Zacks Consensus Estimate for the current year has improved 17.5% in the last seven days.For 2027, the Zacks Consensus Estimate currently shows revenues of $509.77 billion, suggesting an improvement of 20.9% year over year and earnings per share of $14.59, indicating an increase of 4.1% year over year. The Zacks Consensus Estimate for next year has improved 7.5% in the last seven days.GOOGL currently has a long-term (3-5 years) EPS growth rate of 17.1%, above the S&P 500’s long-term EPS growth rate of 16.3%.Image Source: Zacks Investment ResearchInvestment ThesisAlphabet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The stock price has surged 27.2% year to date compared with 8.5% for the S&P 500 Index. Image Source: Zacks Investment ResearchGOOGL represents a rare opportunity to invest in a company with proven execution and substantial unrealized potential in the AI revolution. The astonishing growth potential of the global AI-powered cloud market and its strong guidance and business visibility offer near-term potential. As a result, the average target price of brokerage firms is expected to witness solid near-term upside. At this stage, it will be prudent to buy GOOGL on every dip. Hold this stock for the long term as the company’s extensive AI thrust and robust future projections will generate more value. Radical New Technology Could Hand Investors Huge GainsQuantum Computing is the next technological revolution, and it could be even more advanced than AI.While some believed the technology was years away, it is already present and moving fast. Large hyperscalers, such as Microsoft, Google, Amazon, Oracle, and even Meta and Tesla, are scrambling to integrate quantum computing into their infrastructure.Senior Stock Strategist Kevin Cook reveals 7 carefully selected stocks poised to dominate the quantum computing landscape in his report, Beyond AI: The Quantum Leap in Computing Power.Kevin was among the early experts who recognized NVIDIA's enormous potential back in 2016. Now, he has keyed in on what could be "the next big thing" in quantum computing supremacy. Today, you have a rare chance to position your portfolio at the forefront of this opportunity.See Top Quantum Stocks Now >>This article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks