ii view: AI boosts Alphabet sales by most since 2022

A Google logo at a press conference. Photo: Tobias SCHWARZ/AFP via Getty Images.

First-quarter results to 31 March

• Revenue up 22% to $109.9 billion (£81.3 billion)
• Adjusted earnings up 82% to $5.11 per share

Guidance:

• Now expects capital expenditure of $180-190 billion in 2026, up from a previous $175-185 billion estimate

Chief Executive Sundar Pichai said:

“2026 is off to a terrific start. Our AI investments and full stack approach are lighting up every part of the business.

“It’s really exciting to see how our AI investments are delivering value for our users, customers and business.”

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ii round-up:

Google owner Alphabet Inc Class A (NASDAQ:GOOGL) reported its fastest quarterly revenue growth since 2022, driven by growth in AI related services. 

First-quarter revenue rose by just over a fifth to $109.9 billion (£81.3 billion), driving adjusted earnings of $5.11, up from $2.81 per share a year ago. Wall Street had expected revenue of $107.2 billion. Sales at the group’s Cloud data centre business, hosting AI software for other companies, soared 63% from Q1 last year to $20 billion. 

Shares in the Nasdaq 100 company rose 7% having come into this latest news up by around a tenth so far in 2026. That's similar to the Nasdaq 100 index. Fellow data centre operator Amazon.com Inc (NASDAQ:AMZN) is up 14% year-to-date. 

Alphabet operates across the three divisions of Google Services including its core search engine, Google Cloud, as well as Other Bets, taking in its self-driving Waymo business.

Google Services revenue climbed 16% to $89.6 billion. Paid for subscriptions for the division’s AI geared Gemini app and services rose 40% from the previous quarter. 

Other Bet divisional revenues fell 9% from a year ago to $411 million, although the division’s Waymo taxi business saw fully autonomous rides exceed 500,000 per week. Waymo potentially competes against Tesla Inc (NASDAQ:TSLA) Robotaxis.

Alphabet also announced plans to increase full-year capital expenditure, focused on AI investments. It plans to spend between $180 billion and $190 billion in 2026. That’s up from a previous $175-185 billion estimate and far above 2025’s spend of around $93 billion.

ii view:

Began in 1998 as Google and changing its name to Alphabet in 2015, the company generated revenues of $403 billion in 2025, up 15% year on year. Google Services, combining businesses such as advertising and YouTube subscription fees, generated the bulk of 2025 sales at 85%. That was followed by the Cloud data business at 14.6% and Other Bets a balance of under 1%.  

Geographically, North America remained its biggest market last year at almost half of all sales. That’s followed by Europe, the Middle East and Africa (EMEA) at around 29%, Asia-Pacific 17%, and Latin America the balance.  

For investors, Google dominance in the search engine area is now arguably being tested via increased competition from AI enhanced providers such as ChatGPT and Microsoft Corp (NASDAQ:MSFT)'s Copilot. Expected investment spending of up to $190 billion this year on items such as data centres and AI may not generate returns which investors see as sufficient. A forecast price/earnings (PE) ratio above the three-year average may suggest the shares are not obviously cheap, while supply chain constraints in relation to building new data centres were previously flagged by management. 

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On the upside, dominance within the non-AI search sector likely leaves Alphabet well placed to pick up the running in the new AI enhanced world. Diversity of both business type and geographical region exist. Ownership of the Android mobile phone operating system leaves it less depend than say Meta Platforms Inc Class A (NASDAQ:META) on the metrics set by Apple Inc (NASDAQ:AAPL) for advertising privacy. An increased focus on shareholder returns previously saw the introduction of a dividend payment alongside share buybacks, leaving the shares yielding around 0.2%.  

For now, and while risks remain, this well-managed and diversified tech titan looks to justify its place in many already diversified investor portfolios.   

Positives

• Alphabet dominates the digital advertising market
• Growing Cloud divisional sales

Negatives

• Government concerns for competition
• Subject to currency movements

The average rating of stock market analysts:

Buy