I added Alphabet to my portfolio at $168 in late March. As of mid-May 2026, GOOGL is trading at approximately $195. That's a 16% gain from my entry — part of a broader +34% move the stock has made since April, the strongest quarterly appreciation since 2004. I want to explain exactly why I made that bet, how the thesis has developed, and where I think the stock goes from here.
The Bet Nobody Wanted to Make
When I initiated the position in late March, the market consensus on Alphabet was skeptical. The fear was real and understandable: if AI search assistants could answer user queries directly — if ChatGPT and Perplexity could displace Google's 10 blue links — then Search, which generates roughly 57% of Alphabet's total revenue, was existentially threatened.
That fear drove GOOGL down to levels that made no sense if you looked at the actual financial data. At $168, the stock was trading at approximately 19x forward earnings with Google Cloud accelerating, YouTube growing, and no sign of actual Search revenue deterioration — just fear about potential future deterioration.
My thesis was simple: the market was pricing in a scenario — Search destruction — that wasn't happening in the data. And Alphabet was deploying the infrastructure to make its AI transition an advantage, not a liability.
What Q1 2026 Confirmed
The Q1 2026 results were decisive. EPS came in at $2.81 against a consensus estimate of $2.30 — a 22% beat, which is not a minor rounding-up of estimates. That is a company that dramatically outperformed what analysts were modeling.
The breakdown tells the real story. Search revenue held. YouTube ad revenue accelerated — not just stabilized, but improved sequentially. And Google Cloud grew 28% year-over-year, a reacceleration from the prior quarter. Cloud is now a material business: Google Cloud crossed $12B in quarterly revenue and is operating at margins that are expanding.
The AI Overviews product — Google's generative AI layer built directly into Search — has been rolling out to all queries globally through Q1. Rather than cannibalizing Search revenue, it appears to be increasing engagement, because users who get summarized answers still click for sources, products, and more depth. The feared Search apocalypse has not arrived, and may not arrive in the way the bears modeled.
The AI Stack Thesis
When I talk about an "AI stack thesis," I mean this: the companies that win the AI era are not necessarily the ones with the best model. They are the companies that own the full stack — the compute, the distribution, the user relationship, and the data advantage.
Alphabet owns all four. DeepMind is producing frontier research. Gemini models are competing directly with GPT-4o and Claude. But more importantly, Google distributes AI through the world's largest search engine, the world's most-used video platform, the world's most popular mobile OS, and the world's second-largest cloud infrastructure platform.
This is not the thesis of a company that's behind in AI. This is the thesis of a company that was temporarily mispriced because the market was extrapolating from model benchmarks rather than distribution power.
The $75 billion capex commitment for 2026 is the signal I watch most closely. Alphabet is not hedging on AI — it is putting the full weight of its balance sheet into AI infrastructure. TPUs, data centers, networking, energy — the $75B is being deployed into the infrastructure that powers AI at global scale. When a company with Alphabet's cash generation commits that level of capex to a thesis, it is worth following.
YouTube and Cloud: The Underrated Pillars
One of the things I've found consistently underappreciated is YouTube's position in the AI economy. As AI-generated content increases online, verified human creators on YouTube — with monetizable audiences, brand relationships, and unique personalities — become more valuable, not less. YouTube is a moat that is actually widening.
Google Cloud's 28% growth is a more direct AI play: cloud compute is the raw ingredient of AI workloads, and Google Cloud has specific advantages in TPU infrastructure and in healthcare, financial services, and media verticals where it has built deep integrations. It's not winning the cloud war — AWS is still dominant — but it is growing fast in the segments that matter most for AI-native workloads.
Where the Stock Goes
My current target on GOOGL is $210+. That's based on a scenario where:
- Search revenue continues to grow at mid-single digits as AI Overviews expand engagement rather than cannibalizing it
- Google Cloud continues the reacceleration, reaching 30%+ growth by Q3 2026
- YouTube grows low-double digits as the Shorts monetization ramp continues
- Operating leverage expands as the company absorbs capex into productive assets
At $210 on projected 2026 EPS of approximately $9.50-$10, that's roughly 21-22x forward earnings — a premium to the S&P but appropriate for a business with this growth profile and capital deployment conviction.
The risk to the thesis is a genuine Search disruption that moves faster than Alphabet can adapt — a scenario where AI-native search steals material query share in 2026 before Google's own products can capture it. I think this is a lower probability than the market implied in March, but I'm watching Search revenue closely as the leading indicator. Any material deceleration in Search would prompt a position review.
For now, the data says the AI stack thesis is playing out. The +34% since April is not the entire move — I think there's another 7-10% from here as Cloud reaccelerates and earnings estimates are revised upward.
— Ruslan Averin, averin.com