Key Points
Alphabet’s stock has surged 47% year to date, outperforming the Nasdaq Composite.
Alphabet is successfully monetizing its AI technology across consumer apps and its Google Cloud business.
Shares of Google parent Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) have surged 47% year to date, outperforming the Nasdaq Composite's 21% return as I write this. Alphabet is a large company with a $3.3 trillion market cap, but the stock is still showing the potential to deliver significantly more upside in the coming years.
Alphabet is successfully monetizing its artificial intelligence (AI) technology from consumer apps like Search and YouTube, in addition to meeting growing enterprise demand in Google Cloud. Its AI leadership is the most important reason to consider buying the stock even after its recent surge.
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AI is driving strong growth across the business
AI has expanded Google's opportunity set. This is apparent in the momentum it is experiencing in different areas. For example, its Gemini AI app now has over 650 million monthly users. This is an astounding level of demand for a product that didn't exist three years ago.
AI is changing the world, and Google is capitalizing on it. It's benefiting its advertising revenue on Search and YouTube while driving impressive growth in Google Cloud. The Cloud business has a $155 billion backlog, representing a year-over-year increase of 46%. This indicates insatiable demand for AI cloud services.
The company delivered strong top- and bottom-line growth in the third quarter, with adjusted earnings per share up 35% year over year. Further strong earnings growth could justify new highs for the stock, which still trades at a reasonable forward earnings multiple of 25 based on the 2026 consensus earnings estimate.
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John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.