Prediction: It's Not Too Late to Buy Alphabet Stock as Revenue Surges

By Geoffrey Seiler – May 3, 2026 at 11:29AM ESTKey PointsAlphabet turned in a huge quarter, with both cloud and search revenue growth accelerating.Even more impressive is the operating leverage it has been seeing in its cloud business.Shares of Alphabet (GOOGL +0.23%) (GOOG +0.27%) jumped after the company reported a monster quarter. The stock is up more than 20% this year and up more than 140% over the past year, but I think it has a lot more room to run. Let's dig into the company's first-quarter (Q1) results and prospects, and why I think this is still a great stock to own even as it hits all-time highs. ExpandNASDAQ: GOOGLAlphabetToday's Change(0.23%) $0.89Current Price$385.69Key Data PointsMarket Cap$4.7TDay's Range$379.05 - $386.7652wk Range$147.84 - $386.76Volume30MAvg Vol33MGross Margin60.43%Dividend Yield0.22% Hitting it out of the park In what was an overall strong report, Alphabet's cloud computing unit, Google Cloud, once again stole the show. Revenue for the segment continued to accelerate, surging 63% to $20 billion. That compares to 48% growth in Q4, 34% growth in Q3, and 32% growth in Q2. Meanwhile, it said revenue from products built on its artificial intelligence (AI) models skyrocketed 800% year over year, while Gemini enterprise paid active users surged 40% sequentially. Just as impressive, Google Cloud operating income soared from $2.2 billion a year ago to $6.6 billion, a threefold increase. Its cloud backlog, meanwhile, nearly doubled quarter over quarter to $462 billion. This now includes the sale of its Tensor Processing Units (TPUs), which will be delivered directly to a select group of customers for use in their own data centers. After Alphabet shocked investors last quarter when it set a capital expenditure (capex) budget of between $175 billion and $185 billion for 2026, it decided to raise that amount even more to a new range of $180 billion to $190 billion. In addition, it said it expects its capex to be significantly higher next year, given the huge demand it is seeing for both internal and external computing power. Turning to Alphabet's core Google Search business, revenue for this segment also accelerated, jumping 19% to $60.4 billion. That's up from 17% growth in Q4, 15% growth in Q3, and 12% growth in Q2. Alphabet said consumers love its AI Overviews and AI Mode solutions and are using them more often, pushing search queries to all-time highs. YouTube also continues to perform well, with ad revenue climbing 11% to $9.9 billion. Meanwhile, subscription (which includes YouTube, its Gemini App, cloud storage, and music) and device revenue jumped 19% to $12.4 billion. One area of weakness is its Google Network segment, which saw revenue decline 4% to $7 billion. Alphabet's Waymo robotaxi subsidiary, meanwhile, is now operating in 11 cities and providing 500,000 fully autonomous rides per week. Overall, Alphabet's total quarterly revenue climbed by 22% to $109.9 billion. Earnings per share (EPS) surged by 82% year over year to $5.11. The results topped analyst consensus estimates as compiled by LSEG, which were looking for EPS of $2.63 on revenue of $107.2 billion. However, the results included a $37.7 billion unrealized gain from its investment, such as in SpaceX, and thus the EPS estimates were not comparable. Image source: The Motley Fool. Alphabet stock is still a buy The benefits of Alphabet owning the full AI stack really shone through this quarter. This is helping both drive revenue and reduce costs. While TPUs remain the headline act, the importance of Gemini should not be overlooked. The company is seeing massive growth from enterprise Gemini subscriptions and generative AI products made from its models. Meanwhile, Google Cloud is not just seeing strong growth; it's also seeing its operating margins explode higher. Alphabet has also shown that it can take its Gemini model and use it to drive growth at its core search business. The ability of Alphabet to use Gemini to accelerate both its cloud and search revenue speaks volumes of the symbiotic nature of its AI investments. Given the edge that Alphabet currently has with its TPUs and a world-class frontier AI model, it should be pressing its advantage, and it is doing exactly that with its capex spending. It gets more bang for its buck than competitors and a strong return on its spending, so this is the right move. Alphabet currently trades at a forward price-to-earnings ratio (P/E) of around 35 times 2026 analyst estimates, but don't let that scare you. This is a company spending big to win big, creating a lot of long-term shareholder value in the process. With the most complete AI stack of any company, my prediction is Alphabet still has a lot of upside in the years ahead.Read NextMay 3, 2026 •By Scott LevineStock Market Indexes Explained: What They Are and Why They MatterMay 2, 2026 •By Adam LevyThis Investment Gives You Access to All the Hottest Market Trends: Generative AI, SpaceX, Quantum Computing, Robotaxis, and MoreMay 1, 2026 •By Robin Hartill, CFPBest ESG ETFs to Buy in 2026May 1, 2026 •By Adam LevyBest Growth Stocks to Buy in 2026May 1, 2026 •By Sean WilliamsWant in on AI Superstar Anthropic Before Its IPO? These 4 Companies Are Some of Its Earliest Investors.May 1, 2026 •By Sean WilliamsWarren Buffett Went Out With a Bang by Selling 77% of His Amazon Stake and Piling Into a Virtual Monopoly That's Soared 13,600% Since Its IPOAbout the AuthorGeoffrey Seiler is a contributing Motley Fool stock market analyst covering technology, consumer goods, healthcare, energy, and materials stocks. Prior to The Motley Fool, Geoffrey was a senior equity analyst at Raging Capital Management, a $600 million long-short hedge fund. He holds a bachelor’s degree in history from Haverford College.TMFFindProfitStocks MentionedAlphabetNASDAQ: GOOGL$385.58(+0.20%)+$0.78AlphabetNASDAQ: GOOG$382.96(+0.27%)+$1.02*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.