How Alphabet makes its money
Alphabet is the parent company of Google. Anyone searching for “Google stock” therefore ends up with Alphabet stock. The foundation is advertising. Ads in Google Search, on YouTube and in the advertising network for partner sites generate most of the revenue.
Three further areas complement the business. Subscriptions, platforms and devices cover YouTube Premium, Google One, the Play Store and the Pixel hardware. Google Cloud rents out computing power, storage and AI services to companies. Under “Other Bets”, Alphabet groups future projects such as the robotaxi company Waymo. So far, these projects generate little revenue and make losses. Advertising dominates, the cloud grows fastest, and the rest remains a sideshow.
One company, two tickers: GOOGL and GOOG
Alphabet is listed with two tradable share classes. The Class A share carries the symbol GOOGL and grants one vote per share. The Class C share carries the symbol GOOG and has no voting rights. In addition, there is an unlisted Class B share with ten votes per share. It is held almost entirely by the founders Larry Page and Sergey Brin, who thereby control the majority of all voting rights (in German).
For you as a private investor, the difference is small. Both classes represent the same share of profits and receive the same dividend. Because the founders are in control, the voting right of the Class A share has little practical weight. The prices of the two classes therefore move almost in parallel.
Why I took a closer look at Alphabet
Hardly any company combines the opportunity and the risk of artificial intelligence as directly. Alphabet sells AI infrastructure and its own chips through the cloud. At the same time, AI is changing web search, which is the basis of the advertising business. The same technology drives growth and calls the old model into question.
In a situation like this, I separate the share price from the business. Will users and advertisers stay with Google when AI answers reshape search? Does the cloud earn the money that the chip investments cost? Quarterly results answer such questions more reliably than headlines.
AI as an opportunity: Gemini, cloud and its own chips
Alphabet is one of the few companies with a complete AI stack. The group develops the Gemini models, operates its own data centers and builds its own AI chips, the TPUs. According to figures for the second quarter of 2026, 950 million people use the Gemini app every month. Almost 90% of Fortune 100 companies use Gemini Enterprise.
The chips are a lever of their own. Since April 2026, the seventh TPU generation, Ironwood, has been generally available. Google positions it for inference, meaning the ongoing operation of finished AI models. The most prominent customer is Anthropic, with access to up to one million TPU chips. The eighth generation has already been announced, split into a training chip and an inference chip. This means Alphabet also competes as a chip supplier for the AI budgets of large customers.
AI as a risk to the advertising business
Web search funds the group. This is exactly where AI steps in. AI Overviews and AI Mode answer questions directly on the results page. Users then click on websites less often and possibly on ads less often too. Critics therefore ask whether AI answers can be monetized as well as classic search results.
So far, the break does not show in the figures. Search revenue recently grew at a double-digit rate, and Google now also places ads in AI answers. It remains open whether the margins of these new formats come close to the old level. This question will accompany Alphabet stock for years.
The figures for the second quarter of 2026
In July 2026, Alphabet reported a strong quarter. Group revenue rose by 24% to $119.8 billion. According to an analysis of the quarterly figures, Google Search grew by 17% to around $63 billion. YouTube advertising rose by 13% to $11.06 billion. Google Cloud jumped by 82% to $24.77 billion. Subscriptions, platforms and devices reached $12.91 billion. Other Bets came to $382 million in revenue with a loss of $1.8 billion.
Operating profit rose by 30% to $40.77 billion. The operating margin improved from 32% to 34%. The reported net profit of $112.1 billion, by contrast, is misleading. It includes $98.0 billion of unrealized valuation gains on equity holdings. Book gains like these say little about the day-to-day business.
The capital spending stands out. In the quarter alone, $44.9 billion went into data centers and chips. For the full year, Alphabet raised its range to $195 to $205 billion. The share price initially fell after the results. Alphabet also pays a dividend: since April 2026, it has been $0.22 per share per quarter.
Where the antitrust cases stand
Two major US cases accompany the stock. In the search case, it has been established that Google held an illegal monopoly. The court decided against a forced sale of the Chrome browser. Instead, remedies apply, such as a ban on exclusive default contracts and obligations to share data. Google has filed an appeal. The Department of Justice is also challenging the decision, because in its view the remedies do not go far enough.
The second case concerns advertising technology. In 2025, a court in Virginia found it proven that Google had illegally monopolized two ad tech markets. The authorities are demanding the sale of the ad exchange AdX. Google is offering behavioural remedies. A final order was still pending in mid-2026. Further appeals are likely after every decision. Cases like these drag on for years and remain a factor in the valuation.
Three questions before a possible purchase
First, I check the business. Are Search, YouTube and Cloud growing at the same time, or is only one division carrying the result? It also matters whether the margin stays stable despite the high AI investments. Several quarters compared side by side say more than a single announcement.
Next comes the trend. Even a strong company can be a weak stock if too much optimism was priced in. So I look at whether the price is trading above its long-term moving averages and which way these lines are pointing. This does not replace a valuation, but it puts the starting position in context.
Finally, momentum. After strong moves, the Relative Strength Index helps answer whether a phase is overheated or washed out. Business first, then trend, then momentum. This produces an assessment with context instead of gut feeling.
The main risks
AI can shift search behavior. If chatbots become the first port of call on the web, attention and clicks move with them. Alphabet has to prove that AI search collects as much advertising money as the classic list of results.
The antitrust cases remain open. Remedies in the search business and a possible forced sale in advertising technology could change the business model. The outcome will remain uncertain for years and is hard to value.
The investments are enormous. Up to $205 billion in a single year increases depreciation and ties up capital. If AI demand falls short of expectations, expensive data centers will be left underused.
Competition in AI is tough. OpenAI, Microsoft and Meta are fighting for users, developers and computing power. In this field, technological leadership can change hands faster than in traditional markets.
Advertising depends on the economy. Most of the revenue comes from ads. In a downturn, companies often cut their advertising budgets first. That hits revenue and margin at the same time.
My conclusion on Alphabet stock
Alphabet is in a sturdier position than the debate about the end of web search suggests. Search, YouTube and Cloud are growing, the margin is rising, and with Gemini and the TPUs the group owns its own AI building blocks. The figures for the second quarter of 2026 support this picture.
Three points remain open: the monetization of AI search, the outcome of the antitrust cases and the return on the enormous investments. Anyone assessing the stock should re-examine these questions regularly instead of relying on a one-off assessment.
This is not a buy recommendation. The analysis gives you the framework: first the business, then the trend, then the momentum. With this three-step approach, you assess Alphabet stock by the same standards as any other position.