Google Cloud Is Turning AI Demand Into Profits. Should You Buy the Stock?

Core Insights - Alphabet is experiencing strong demand for its AI cloud services, with significant revenue and profit growth driven by Google Cloud [1][4] - Google Cloud's operating income surged 154% year over year in Q4, contributing to Alphabet's overall double-digit earnings growth [2][4] - Cloud revenue increased by 48% year over year, accelerating from a previous 34% increase, with operating income reaching $5.3 billion in Q4 [4] Financial Performance - Google Cloud currently contributes 15% of Alphabet's total operating profit, while digital advertising remains the primary revenue source at 72% of Q4 revenue [4] - Alphabet's stock price has seen a significant recovery, increasing by 107% in 2025 after a sell-off in April [1] - The current market capitalization of Alphabet is $3.9 trillion, with a stock price of $318.57 [5] Investment Outlook - Alphabet is planning to double its capital spending in 2026, which may create short-term pressure on share prices [6] - The company is focusing on investing in AI infrastructure, positioning itself to capture future profits from AI technology [7] - Despite higher share prices, the stock is trading at 28 times 2026 earnings estimates, which is considered reasonable for a company of its caliber [7]