Alphabet Inc. (GOOGL) shares closed at $387.66 on Tuesday, nearing a 52-week high of $408.61 reached on May 18. The stock has surged 23.9% year-to-date, outperforming the Zacks Computer & Technology sector, which has returned 16%. Despite strong performance driven by advancements in AI-powered Search and investments in Cloud computing, concerns loom over capacity constraints and increased capital expenditures projected between $180 billion and $190 billion for 2026.
In Q1 2026, Alphabet held a 14% market share in cloud computing, trailing Amazon at 28% and Microsoft at 21%. The company faces intense competition from these giants and from Apple in the consumer technology market. Alphabet’s trailing 12-month cash flow stood at $174.4 billion, but rising expenses are expected to pressure free cash flow, currently at $64.4 billion. The Zacks Consensus Estimate for 2026 earnings is $14.29 per share, showcasing a 22.1% recent increase, with revenues expected to reach $422.05 billion, up 23.1% year-over-year.
While GOOGL shares have outperformed peers like Amazon and Microsoft, analysts suggest the stock may be overvalued, currently trading at a forward P/E of 26.81, compared to the sector average of 25.48. The company’s ongoing AI advancements, particularly in Search, have bolstered user engagement and ad performance, with management reporting all-time high search queries.
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