Alphabet GOOGL benefits from accelerating demand for artificial intelligence (AI) infrastructure and enterprise AI solutions, which is strengthening Google Cloud’s competitive position against Amazon AMZN and Microsoft MSFT. In the second quarter of 2026, Google Cloud revenues surged 82% year over year to $24.8 billion, driven by Google Cloud Platform (GCP), enterprise AI solutions, AI infrastructure and core GCP services.
Google Cloud’s growth is being supported by Alphabet’s integrated AI portfolio spanning chips, models, data, security and agent platforms. Gemini is embedded across Gemini Enterprise, data analytics, cybersecurity and Google Workspace. Alphabet more than doubled its new-customer acquisition velocity year over year, while existing customers expanded usage and exceeded their commitments by more than 50%. Google Cloud Marketplace transactions also increased more than sevenfold. Nearly 90% of the Fortune 100 are using Gemini Enterprise, highlighting growing enterprise adoption.
Rapid cloud growth is benefiting the company’s profitability. In the second quarter of 2026, Google Cloud operating income more than tripled year over year to $8.8 billion, while operating margin expanded sharply to 35.6% from 20.7%. Cloud backlog reached $514 billion after increasing more than $50 billion sequentially, driven by strong Enterprise AI demand. Alphabet expects slightly more than half of this backlog to convert into revenues over the next 24 months, providing strong visibility.
However, Alphabet remains supply constrained as AI demand outpaces available compute capacity. The company plans to use additional third-party capacity while expanding internal infrastructure, which is expected to pressure Cloud margins modestly in the near term. Nevertheless, rising enterprise adoption, expanding AI infrastructure offerings, improving Cloud profitability and a massive backlog should strengthen Alphabet’s ability to challenge Microsoft and Amazon for a larger share of enterprise AI and cloud spending.
How Competitors Fare Against GOOGL
Despite Alphabet’s expanding portfolio, the company faces stiff competition from Amazon and Microsoft. Both companies are expanding their footprint in the cloud infrastructure space.
Amazon is benefiting from accelerating cloud infrastructure and AI demand through its cloud computing platform Amazon Web Services (“AWS”), which saw second-quarter 2026 revenues surge 37% year over year to $42.2 billion, while operating income jumped 64% to $16.6 billion. Growth is being supported by the rising adoption of Trainium, Amazon Bedrock and AI services, with both AWS’s AI and chips businesses surpassing $25 billion annual revenue run rates.
Microsoft is benefiting from strong demand for Azure and AI infrastructure, with Azure and other cloud services revenues rising 43% year over year in the fourth quarter of fiscal 2026. The company’s Cloud revenues increased 27% to $59.3 billion, while Azure revenues surpassed $100 billion in fiscal 2026, highlighting robust cloud adoption.
GOOGL’s Share Price Performance, Valuation & Estimates
Alphabet shares have risen 8.9% year to date, underperforming the broader Zacks Computer and Technology sector’s growth of 15.4%.
GOOGL Stock Performance
Image Source: Zacks Investment Research
GOOGL stock is trading at a premium, with a forward 12-month price/sales of 8.28X compared with the broader Computer and Technology sector’s 6.31X. Alphabet has a Value Score of C.
GOOGL’s Valuation
Image Source: Zacks Investment Research
The Zacks Consensus Estimate for 2026 earnings is pegged at $20.50 per share, which has declined by a penny over the past 30 days. This suggests 89.64% growth from 2025’s reported figure.
Alphabet Inc. Price and Consensus
Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote
Alphabet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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The AI revolution has already minted millionaires. But the stocks everyone knows about aren’t likely to keep delivering the biggest profits. AI’s second wave is moving from infrastructure to implementation and these companies are at the forefront of this transition, positioned to become what Amazon and Google were to the internet era.
Alphabet Inc. (GOOGL) : Free Stock Analysis Report
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This article originally published on Zacks Investment Research (zacks.com).
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