Alphabet’s (GOOGL) Stock is Hot Due to its AI Assistant Gemini 3.0 & its TPUs

Stock (Symbol)

Alphabet (GOOGL)

Stock Price

$319

Sector

Data is as of

Expected to Report

Company Description

Alphabet’s segments include Google Services, Google Cloud, and Other Bets.

The Google Services segment includes products and services such as ads, Android, Chrome, hardware, Google Maps, Google Play, Search, and YouTube.

The Google Cloud segment includes Google’s infrastructure and platform services, collaboration tools, and other services for enterprise customers.

The Other Bets segment includes earlier stage technologies that are further afield from its core Google business, and it includes the sale of health technology and Internet services. Its Google Cloud provides enterprise-ready cloud services, including Google Cloud Platform and Google Workspace. Google Cloud Platform enables developers to build, test, and deploy applications on its infrastructure. Google Workspace collaboration tools include applications, such as Gmail, Docs, Drive, Calendar, Meet, and various others.

The Company also has various hardware products. Source: Refinitiv

Sharek’s Take

Founded in 1998, Alphabet’s mission is to organize the world’s information and make it universally accessible. Alphabet’s brands include Google, YouTube, Android, Google Chrome, Google Maps, Gmail, Pixel, Google Cloud, and Waymo. Alphabet also designs its own semiconductors — or chips — which are called Tensor Processing Units (TPU). TPUs are different in that they are designed to do one specific task, as opposed to GPUs and CPUs which can do many things. GPUs and CPUs take data back and forth between memory and computing. TPUs process without constantly accessing memory, allowing them to use less power and making them more cost effective. GOOGL uses Broadcom to help design TPUs, which are then made by Taiwan Semiconductor. Google had used its TPUs in its own datacenters for years, and is now selling them to customers, which might include Meta. This poses competition to NVIDIA and AMD, and makes GOOGL a player in AI chips.

Here are Alphabet’s main divisions:

• Google Search — ad revenue from the search engine from Google.com
  • 55% of total Alphabet revenue last qtr, with +15% year-over-year (yoy) growth.
  • Retail and Financial Services were the strongest verticals.
  • AI Overviews and AI Mode continue to drive growth in overall queries.
  • AI Max, which helps advertisers discover new customers in the exact moment they need the product or service, is the fastest-growing AI-powered Ads Search product.
  • Shopping capabilities in AI mode help customers shop conversationally in Search.
• Google Cloud
  • 15% of total revenue, +34% growth last qtr.
  • Growth was driven by strong demand for Enterprise AI.
  • Revenue from products built on generative AI was +200%
  • Cloud backlog was +82% year over year.
  • New customers were +34%.
• Google Other — app sales on Google Play Store, YouTube subscriptions, Pixel phones.
  • 13% of total revenue, +21% growth.
  • Very strong growth in YouTube and Google One subscriptions.
• YouTube Advertising
  • 10% of revenue, +15% growth.
  • Driven by Direct Response advertising and Brand.
  • Recommendation systems are driving watch time growth in Shorts and Living Room segments.
  • YouTube remains number one in streaming watch time in the US.
• Google Network Members — Ad Manager (programmatic ads on websites) & Ad Mob (ads on an app).
  • 7% of company revenue last qtr, -3% growth yoy.
• Other Bets
  • 0% of revenue, -11% growth.
  • Waymo aims to expand into London and Tokyo.

Alphabet is a conservative growth stock with a good growth rate. Prior to 2022, the company had profits up every year since its IPO outside of 2017 (which was only down as it switched its accounting practices to a more conservative stance). The stock has an Est. LTG of 17% a year, and a P/E of 29. Management pays a tiny dividend and also buys back stock. In 2024, management has returned almost $70 billion to shareholders via stock buybacks and dividends. GOOGL is part of my Growth Portfolio, Conservative Growth Portfolio, and Aggressive Growth Portfolio.

One Year Chart

Google broke out past $275 after the company reported earnings. Shares were $193 last qtr and are $319 today.

This P/E is 29 when I calculate it using 2026 profit estimates. We are in GOOGL’s Fiscal Q4 now.

The Estimated Long-Term Growth Rate is 17%. This figure was 17% last quarter.

Profits grew an impressive 46% last qtr.

Earnings Table

Last qtr, Alphabet delivered impressive 46% profit growth and whipped expectations of 10%. Revenue increased by 14%, versus estimates of 13%. GOOGL posted double-digit revenue growth across every major part of its business.

• Google is investing heavily in infrastructure for its Cloud segment. It is the only company providing a wide range of GPUs from its partner NVIDIA, plus its own purpose-built TPUs, which are more efficient for AI.
• YouTube has been number one in streaming watch time in the US for two years. YouTube Shorts now earns more revenue per watch hour than traditional in-stream videos.
• The Gemini app now has over 650 million monthly users.
• The company unveiled its Pixel 10 series of devices in August, running on its most powerful chip Tensor G5. It also launched Android XR, a new operating system for Samsung’s Galaxy XR device.

Annual Profit Estimates jumped this qtr. To keep up with the growing demand for AI and cloud services, Alphabet increased its full-year capital spending plan (CapEx) to ~$92 billion, up from $85 billion. The company is continuing its build-out of servers and data centers.

Qtrly Profit Estimates for the next 4 qtrs are 21%, 11%, 16%, and -10%. Analysts think revenue will grow 15% next quarter. Depreciation costs will accelerate slightly this quarter. Sales and Marketing expenses will be higher towards the end of the year to support product launches and the holiday season.

Fair Value

Notice how this stock has had a 20-something P/E most of the past decade. Well, it could rise into the 30s in the near future.

GOOGL is $319 today. My Fair Value for 2026 is a 35 P/E, that’s $385 a share. The upside is 21% in my opinion.

I believe this stock has 38% upside for 2027.

In 2017, GOOGL changed its accounting practices to more conservative accounting, and that’s why profits declined that year.

Bottom Line

Alphabet (GOOGL) has been a steady grower this past decade, but 2020’s-2021’s move higher was a big one (116%) and the stock had to digest some gains. Now the stock is trending higher once again.

Google’s new Gemini 3.0 has taken AI by storm. And Google’s TPUs now make the company a player in AI chips. These catalyst might push the stock’s P/E into the 30s.

I really like this stock for the Conservative Portfolio. It’s got a great combo of growth and safety, and ranks 1st in the Power Rankings.

In the Growth Portfolio, the stock pushes up from 11th to 7th in the Power Rankings.

GOOGLE ranks 11th in the Aggressive Growth Portfolio Power Rankings.

Power Rankings

7 of 31

Aggressive Growth Portfolio

11 of 15

Conservative Stock Portfolio

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