Google Cloud Revenue Just Surged 48%. Is Alphabet the Best AI Stock to Buy Now?

Core Insights - Alphabet reported Q4 2025 results that exceeded Wall Street estimates, with a 2.4% revenue surprise and a 6.8% outperformance on earnings [1] - Google Cloud experienced significant growth, with sales increasing by 48% year over year to $17.7 billion, representing 15.5% of Alphabet's total revenues, and operating income rising 154% to $5.3 billion [2] - Despite strong results, Alphabet's stock fell 6.5% post-report due to concerns over its substantial AI infrastructure spending plans [3][4] - Alphabet remains the top performer among the "Magnificent Seven" stocks over the past year, with a stock price increase of 68%, outperforming Nvidia's 47% gain [5] Valuation Analysis - Alphabet's stock is currently trading at 30 times trailing earnings and 9.6 times sales, which may be considered high but not excessively so for the tech sector [8] - The forward price-to-earnings ratio stands at 24x, with a price/earnings-to-growth (PEG) ratio of 2.0, indicating a potentially overvalued position [8] - Analyst consensus suggests a conservative five-year average earnings growth estimate of 12.3% per year, significantly lower than the current five-year growth rate of 30% [8]