NEW YORK, Jan 2, 2026, 08:10 ET
- Alphabet shares rose 65% in 2025, their strongest annual performance since 2009, as investors warmed to its AI push.
- Wall Street expects 2026 earnings growth to slow sharply as capital spending rises, putting Google Cloud in focus.
- Alphabet’s class A shares (GOOGL) were down about 0.3% at $313 on Friday morning.
Alphabet, the parent of Google, is starting 2026 after its shares rose 65% in 2025, the company’s best annual performance since 2009. The stock hit its 2025 low in April before rallying more than 100% from those levels, reported.
The rally matters now because investors are shifting from the “AI story” to results that show the spending is paying off. Expectations for profit growth are cooling even as Alphabet ramps up investment in computing infrastructure needed to build and run AI systems.
That puts pressure on Google Cloud to keep gaining share against Microsoft’s Azure and Amazon Web Services, while Alphabet also tries to defend and grow its core search and advertising business as AI tools change how people find information online.
Alphabet’s class A shares (GOOGL) were down about 0.3% at $313 on Friday morning.
Wall Street expects earnings per share (EPS) — profit allocated to each share — to rise about 6% in 2026 to $11.24, after an estimated 32% increase in 2025, Investor’s Business Daily said.
The report said capital spending, money used to build long-lived assets such as servers and data centers, is projected to climb nearly 29% in 2026 to $114.3 billion as Alphabet pours more resources into AI.
Google Cloud is in the spotlight because it is one of Alphabet’s biggest growth engines outside advertising. IBD said cloud revenue jumped 33.5% in the third quarter and that the unit had $155 billion in backlog — contracted orders not yet recorded as revenue.
Investors are also tracking how quickly Alphabet can expand the reach of its Tensor Processing Units, or TPUs, the company’s in-house chips designed to run AI models. IBD said the Gemini chatbot has reached 650 million monthly users as Google competes with products such as ChatGPT.
Market strategists cautioned against overreading short-term swings that tend to be magnified by thin holiday trading. “I do not expect that the last few days will have so much bearing on the performance of the next year,” said Giuseppe Sette, co-founder and president of Reflexivity, in a Reuters report on year-end trading.
U.S. stocks finished 2025 with double-digit gains, powered by enthusiasm for AI-linked companies, according to Reuters. Alphabet’s surge helped lift the S&P 500’s communication services sector to the top of the index’s performance table for the year.
Some investors remain bullish on Alphabet’s prospects into 2026 despite the higher spending outlook. A Dec. 31 analysis from Seeking Alpha contributor Millennial Dividends called Alphabet a top pick for 2026 and argued the stock’s valuation — often measured using the price-to-earnings ratio, or P/E — is supported by growth in ads, YouTube and cloud.
