There are moments in the stock market when a single company shifts the entire narrative—when doubt turns into dominance, and when uncertainty transforms into one of the strongest performances in the market. Over the past year, that company has been Alphabet, the parent of Google. What looked like a company under pressure has become the standout AI winner of 2025.
Today, we’re breaking down how Alphabet pulled off this comeback, why the stock exploded higher, and what long-term investors should understand before making their next move.
Let’s start with what things looked like a year ago. Alphabet was in a difficult position. Regulators were aggressively scrutinizing the company, and a major ruling had labeled Google a monopolist. Investors feared that Google might be forced into a breakup. At the same time, generative AI was exploding in popularity. ChatGPT had become a global phenomenon, and for the first time, many people questioned whether Google Search—Alphabet’s most important business—was vulnerable.
All of this pushed the stock down to one of its cheapest valuations in years. Alphabet traded around 20 times forward earnings, making it the lowest-priced company in the entire Magnificent Seven. It was valued below the market multiple. A lot of investors stepped back. But this turned out to be one of the biggest misreads of the year.
The feared breakup never happened. Regulators settled on mild penalties, and Alphabet didn’t lose control of its core business. And instead of being swept away by the wave of AI disruption, the company adapted with surprising speed.
The turning point came with the launch of Gemini 3. Alphabet entered the AI race with a model that didn’t just keep up—it reestablished the company as a true leader. Gemini 3 delivered more advanced reasoning capabilities, new tools for developers, and improvements that made the entire product ecosystem—from Search to YouTube to Cloud—more AI-driven and more competitive.
What made this shift so powerful is that the innovation didn’t just show up in demos or headlines. It showed up in the fundamentals.
Alphabet’s financial performance has been exceptional. Profit margins expanded even while the company poured billions into AI infrastructure. Pretax profit jumped by almost 40% year over year. Capital spending rose dramatically, but efficiency rose even faster. This is the type of execution investors hope for but rarely get from a trillion-dollar company.
And that leads to one of the key reasons investors are paying attention: Alphabet has managed to scale AI investment without sacrificing profitability. In fact, its profit margins improved while spending increased. That’s the perfect combination—growth plus discipline.
Even after the stock’s massive run, Alphabet remains one of the more reasonably priced tech giants. It trades around 26 times earnings—still cheaper than most of its peers. Meta is the only member of the Magnificent Seven priced lower. The difference is that Meta’s margins have slipped because its spending has surged faster than results. Alphabet is showing the opposite pattern: rising spending, but even faster-rising profits.
This is part of why long-term investors like Berkshire Hathaway recently added Alphabet to their portfolio. Berkshire rarely buys into high-growth tech, so when they do, it raises eyebrows. It’s a signal of confidence in Alphabet’s long-term durability.
But where does Alphabet go from here?
To keep the stock moving higher, earnings will need to continue expanding. Analysts expect Alphabet’s 2025 earnings to climb past 10 dollars per share. For the momentum to hold into 2026, earnings will likely need to reach 12 to 13 dollars per share. That would be a meaningful increase from current expectations, but based on the company’s recent performance, it isn’t unrealistic.
One of the biggest catalysts is Google Cloud. The cloud business has already become a meaningful profit driver, and projections show revenue rising from roughly 57 billion dollars in 2025 to about 75 billion in 2026. This growth is tied directly to AI demand. As companies across every industry adopt AI tools, build custom models, and deploy new workflows, cloud platforms become the backbone of everything. Alphabet is well positioned to capture that wave.
And the spending cycle behind AI is far from slowing down. Tech giants are expected to pour hundreds of billions into AI data centers, new chips, and next-generation infrastructure over the next few years. Alphabet, Amazon, Microsoft, and Meta have the cash flow, the balance sheets, and the customer base to support this investment. These companies have over a trillion dollars in combined borrowing capacity if they ever wanted to accelerate even faster.
That kind of financial strength creates a wide moat—and Alphabet is using that position to build one of the most competitive AI ecosystems in the world.
The momentum behind Gemini also strengthens Alphabet’s position. Each new version improves user experience, developer tools, and enterprise applications. Better models attract more usage. More usage generates better data. Better data sharpens the next model. This is the classic flywheel effect that often separates long-term winners from temporary hype cycles.
And here’s the important takeaway: Alphabet isn’t relying on a single product to drive its future. AI enhancements will touch Search, YouTube, advertising, Android, Workspace, and Cloud. That diversification reduces risk and opens multiple new revenue avenues across the company.
So what should investors consider now?
If you’re already holding Alphabet, this is a stock worth keeping in your portfolio. The company has momentum, strong earnings, rising margins, and a leadership position in the world’s most important technology trend. It may not repeat last year’s gain, but the long-term story remains strong.
If you’re thinking about buying, the valuation is still reasonable relative to its peers. Alphabet isn’t a deep value stock anymore, but it’s far from overpriced compared to other AI leaders. For long-term investors, especially those focused on AI infrastructure, cloud expansion, and strong cash-flow companies, Alphabet remains one of the most compelling names in big tech.
The last twelve months made one thing clear: Alphabet didn’t just survive the AI disruption cycle—it emerged stronger, more innovative, and more profitable. And if the company continues to execute at this level, its transformation into a true AI powerhouse is only getting started.
This is the story of a tech giant that refused to get left behind—and instead became one of 2025’s biggest winners. For investors, the next chapter could be just as interesting.