Alphabet reported first-quarter revenue of $109.9 billion on April 29, a 22% increase from a year earlier that beat Wall Street estimates, and traders pushed the shares higher: as of May 22 Alphabet stock was up roughly 130% over the prior 12 months, valuing the company at about $4.6 trillion.
The surge has been driven by broad gains across the business. Google Search revenue rose 19% in the quarter, YouTube ad sales climbed by almost 11%, and Google Cloud revenue jumped 63% year over year — Cloud also finished the quarter with $462 billion in customer backlogs. Management highlighted that the 22% revenue growth was Alphabet’s fastest rate in 16 quarters.
Philipp Schindler pointed to artificial intelligence as the common engine behind those numbers, saying: "We see AI Overviews and AI Mode continue to drive greater Search usage and growth in overall queries, including in commercial queries." That message landed alongside a slate of product announcements at Google I/O — including Gemini Flash 3.5, Universal Cart, Gemini Spark, Antigravity and Gemini Omni — and a redesign of the search bar for the first time in 25 years.
Alphabet and its execs pushed forward concrete metrics to justify the optimism. The company said Gemini Flash 3.5 was built with speed and agentic AI in mind and can complete tasks at half, or in some instances a third, of the cost of competitors; the new capabilities are expected to power both the Gemini app and Google Search. Waymo, the self-driving unit, is completing more than 500,000 rides per week, a sign that momentum reaches beyond software and advertising.
Investors appear to be rewarding the combination of rapidly growing revenue and product momentum: Alphabet’s price-to-earnings ratio sits at 29.6, about 62% higher than it was a year earlier. That higher valuation comes while management is dialing up spending. Capital expenditures totaled $91 billion in 2025; the company is targeting $180 billion to $190 billion this year, and Chief Financial Officer Anat Ashkenazi said capital expenditures will "significantly increase" in 2027.
The numbers expose the tension beneath the rally. Revenue is accelerating at a pace Alphabet hasn’t seen in years, and Google Cloud’s 63% growth plus a vast backlog argue for continued expansion — but the company is also committing to vastly higher capital spending that will absorb cash and raise expectations for returns. Alphabet’s claim that Gemini Flash 3.5 can slash AI costs versus rivals sharpens the stakes: lower operating costs could validate heavy investment, but the cost advantage is Alphabet’s assertion rather than an independent, market-level fact.
For now the market is banking that product breakthroughs and surging ad and cloud demand will justify both the higher valuation and the flood of capital spending. What matters next is whether those investments convert into sustained margin expansion and cash flow growth; if they do, the current run in googl stock will look prescient. If they do not, the company will have swapped one set of skeptics for another — investors who expected explosive returns on a bigger, more expensive Alphabet.
Schindler’s basic claim — that new AI features are drawing more, and more commercial, queries — is straightforward and observable in the quarter’s top-line numbers. The single most consequential question now is whether the company’s multi-year and multi-hundred-billion-dollar bet on infrastructure and AI will produce returns large enough to justify both the higher P/E and the jump in capital spending by 2027.
