The bar has been set excessive for Alphabet, one of many world’s largest corporations and a member of the carefully watched “magnificent seven.”
The corporate is greatest recognized for its Google web search dominance and its extensively used Chrome browser. Google instructions almost 90% of search market share worldwide, and its Chrome browser has almost 3.5 billion customers.
Alphabet continues to generate most of its income from conventional search; nonetheless, different components of its enterprise are more and more driving progress. Its newest replace to Wall Avenue reveals that one in every of them — Google Cloud — is accelerating due to the widespread growth of AI chatbots and agentic AI apps.
Alphabet third quarter statistics:
- Workers:190,167
- Income:$102.35 billion
- Web earnings:$34.9 billion
- Earnings per share: $2.87
- Inventory worth: $282
- Market cap: $3.4 trillion.
Supply: Alphabet SEC filings; TheStreet
Google Cloud is already among the many largest cloud information community corporations, rating alongside Amazon’s AWS and Microsoft’s Azure. These high gamers are often called hyperscalers attributable to their measurement and talent to scale quickly in response to shifting demand.
However Google Cloud is morphing from a standard information storage supplier for governments and enterprises right into a community infrastructure firm, providing super-fast and environment friendly chips ideally fitted to AI workloads.
The transfer is not the one one that’s reshaping Alphabet’s future. It is also orchestrated one of many biggest comebacks of all time towards rival OpenAI’s ChatGPT — efficiently positioning itself to revenue as extra folks flip to AI chatbots for solutions.
The shifts aren’t misplaced on Financial institution of America, one in every of Wall Avenue’s most extremely regarded funding banks. Its analysts simply reset their Alphabet forecast based mostly on the corporate’s newest replace.
Alphabet CEO Sundar Pichai has seen demand for Google Cloud and Gemini surge in 2025.
Picture supply: Justin Sullivan/Getty Pictures
Alphabet rides tsunami of AI demand progress
ChatGPT ushered within the fashionable period of AI. Whereas pc scientists, futurists, and science fiction lovers have lengthy thought of AI’s potential, it has solely been because the launch of ChatGPT in 2022 that AI has gone mainstream.
ChatGPT turned the quickest new app ever to achieve 1 million customers after its launch by OpenAI, unleashing a torrent of analysis and growth, together with from Alphabet (GOOGL).
Alphabet’s first try, Bard, fell brief, however its reboot as Gemini has impressed, turning it into a significant rival to ChatGPT. Gemini constantly ranks as essentially the most downloaded app in Apple’s App Retailer, alongside ChatGPT — even lately displacing ChatGPT for a brief interval as essentially the most downloaded app earlier this fall.
Within the firm’s earnings name, Alphabet CEO Sundar Pichai painted a rosy image for Gemini’s success, noting that it now boasts over 650 million lively month-to-month customers. Throughout Gemini and AI Mode, Financial institution of America estimates Google has 75 million day by day lively customers, in keeping with a analysis notice shared with TheStreet.
Alphabet’s Google Cloud can also be experiencing unprecedented demand attributable to AI, and this demand is not exhibiting indicators of slowing down. Exiting the fourth quarter, Google Cloud boasted a backlog of enterprise of roughly $106 billion. Now, they declare a $155 billion backlog.
Google Cloud Income (2025):
- Q3 2025: $15.2 billion, up 34% yr over yr.
- Q2 2025: $13.6 billion, up 32% yr over yr.
- Q1 2025: $12.3 billion, up 28% yr over yr.
Google Cloud Working Margin (2025):
- Q3 2025: 23.7%.
- Q2 2025: 20.7%.
- Q1 2025: 17.8%.
The surging demand for Google Cloud is pushed not solely by means of servers, but additionally by the rising use of Google’s newest AI chips, together with Trillium. Whereas Nvidia is the Goliath within the AI chip market, due to its huge put in base of H100 chips and rising deployment of its hyper-fast Blackwell chips, Google’s Tensor Processing Models (named to replicate their integration with its TensorFlow open-source machine studying software program) are rapidly carving out a distinct segment amongst corporations seeking to decrease prices.
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Whereas its TPUs aren’t as quick and versatile as Nvidia’s Blackwell, they’re significantly cheaper, and they’re nonetheless a lot faster than conventional prior-generation alternate options. They’re particularly designed to scale back vitality prices and combine seamlessly inside Google’s ecosystem, making it a pretty selection for corporations that already closely depend on Google Cloud.
The continuing adoption of Gemini (thanks partly to its deep integration with Chrome and Android) and Google Cloud’s backlog, supported by Trillium, supplies a transparent line of sight for Alphabet’s shareholder-friendly income and revenue progress.
Financial institution of America resets Alphabet inventory worth goal
A significant concern since ChatGPT’s launch is that AI chatbots will diminish the necessity for conventional search, posing a major headwind to Google’s search advert income. Alphabet’s integration of AI mode and AI overviews seems to have stabilized Google search, on condition that enterprise grew 15% yr over yr within the third quarter, outpacing Wall Avenue’s consensus estimate for 11% progress.
Financial institution of America notes that paid clicks elevated by 7% in comparison with 4% within the second quarter, regardless of the widespread utilization and ongoing progress of ChatGPT. That means to its analysts that AI is inflicting extra folks to seek for extra issues, “expanding the overall information opportunity.”
The analysts are additionally impressed with Google Cloud and, particularly, Alphabet’s chips.
Altogether, Alphabet’s momentum and line of sight, due to its backlog, led Financial institution of America to recalculate its outlook for earnings, ratcheting its forecast 4% increased for 2026 and seven% increased for 2027.
The rise to its earnings forecast now has Financial institution of America pondering Alphabet’s inventory worth may climb to $335 per share, up from a earlier goal of $280.
The analysts conclude that Google is “well positioned for AI with a leading LLM, proprietary TPU technology and massive user base.”
Though ChatGPT will stay a fierce competitor, they are saying, “there can be multiple beneficiaries from growing AI capabilities.”
Todd Campbell owns shares in Alphabet inventory.
