TLDR
- Alphabet stock reached $299.66, marking a 70% gain over 12 months to new record territory
- Pretax profit margins expanded seven percentage points in Q3 while profit grew 39% year-over-year
- Google Cloud outpaced competitors with 34% revenue growth versus Microsoft’s 33% and Amazon’s 20%
- Gemini AI platform increased market share from 5.6% to 13.7% of generative AI web traffic in one year
- Berkshire Hathaway invested $4.34 billion in Alphabet, validating the company’s AI strategy
Alphabet shares closed at $299.66 on Friday, setting a fresh all-time high. The stock has gained nearly 70% over the past 12 months.
A year ago, things looked uncertain. Federal courts had ruled Google a monopolist. ChatGPT’s explosive user growth threatened search dominance.
The stock traded at 20 times forward earnings. That represented the lowest valuation in the Magnificent Seven group.
The situation reversed course. Antitrust penalties came in milder than feared. Google delivered four consecutive quarterly earnings beats.
Shares now command 26 times earnings. The 70% gain split evenly between multiple expansion and earnings growth.
Berkshire Hathaway added $4.34 billion in Alphabet shares. The stock leads Magnificent Seven performers in 2025 with a 59% year-to-date gain.
Strong Profit Growth Despite Investment
Third-quarter pretax profit increased 39% from last year. Margins expanded by seven percentage points. These gains came while capital spending jumped from $13 billion to $24 billion.
The performance stands out against peers. Meta saw profit margins contract two percentage points. Meta’s capital spending more than doubled to $19 billion.
Google Search revenue climbed 15% year-over-year. The business still drives about 55% of total revenue. Early predictions about AI destroying search haven’t materialized.
Wall Street expects earnings above $10 per share in 2025. Last year’s forecast was $9 per share. Analysts project 2026 earnings could reach $12 to $13 per share.
Cloud Division Powers Revenue
Google Cloud Platform holds 13% of the global market. Amazon AWS commands 29% while Microsoft Azure has 20%.
Third-quarter Google Cloud revenue surged 34%. That topped Microsoft’s 33% growth rate and Amazon’s 20% increase.
Forecasts call for Google Cloud to generate $75 billion in 2026. That’s up from roughly $57 billion expected in 2025.
Google launched Gemini 3 on November 18. The updated AI model includes Deep Think for advanced reasoning. New features cover coding improvements and generative interfaces.
Gemini now serves 650 million monthly active users. ChatGPT reports 800 million weekly active users. Gemini captured 13.7% of generative AI web traffic, up from 5.6% twelve months earlier.
Investment Outlook and Targets
Bill Nygren from Oakmark Funds says valuation remains reasonable. “The stock going from $160 to over $300 has made it look less attractive, but [Alphabet is] still not selling for more than we think it’s worth,” he explained.
Evercore’s Mark Mahaney maintains a $325 price target. He describes the fundamentals and innovation as impressive.
Analysts average a $321.94 price target. That suggests 7% upside potential from current prices.
Technical indicators show overbought readings. The 14-day RSI sits above normal levels. Support could emerge around $290 if shares pull back.
CEO Sundar Pichai highlighted Waymo’s momentum. The self-driving division expects strong results in 2026.
Third-quarter capital expenditures totaled $24 billion. The company maintains heavy investment in AI infrastructure. Google also developed its own Tensor Processing Unit chip for AI workloads.
The stock traded at 26 times earnings as of Friday’s close. That makes it the second-cheapest Magnificent Seven stock after Meta Platforms at 20 times.
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