The king of AI Alphabet (Google)

I also recommend reading another post for The king of AI Alphabet, I post before using it, titled “The pros and cons of investing in Alphabet amid AI evolution“

Q1 2026 Earnings Reports

Alphabet and Meta’s Grows 22% and 33% by AI

In the first quarter of 2026 earnings season, Alphabet delivered revenue that increased by 22% year-over-year to $109.9 billion, marking its 11th consecutive quarter of double-digit growth.

Meta, meanwhile, achieved a 33% revenue growth rate and $56.3 billion in quarterly revenue, marking its 13th consecutive quarter of double-digit growth, along with equally strong profitability.

How Did Investors React?

Note that these are mega-corporations with market capitalizations of over $4 trillion and $1.5 trillion respectively; even 10% revenue growth would be difficult for them. Generally, both companies’ stock prices would surge the following day, with Meta’s increase significantly exceeding Alphabet’s! Meta’s last such revenue growth was 33.2% in Q4 2020.

However, the following day, Meta’s stock price plummeted 8.55%, while Alphabet’s surged 9.96%! Why such a large difference?

Meta Advertising’s Astonishing Growth Due to AI

Meta, however, has become a contradictory phenomenon. Meta is rapidly expanding its core business of social media advertising (reflected in a 33% revenue growth), yet it must continue to invest heavily in AI for the future, with the return on investment still shrouded in uncertainty. The main reason is that 98% of Meta’s revenue comes from advertising, a figure virtually unchanged since its inception. However, this singular revenue stream represents extremely high business risk.

Time proven Alphabet a great success

Alphabet’s Diversified Business is Successful

Especially during economic downturns, businesses will inevitably reduce advertising spending first, and companies like Meta and Alphabet, which rely heavily on advertising, will be severely impacted. The COVID-19 pandemic in 2020 demonstrated the impact on both companies to investors.

AI Benefits All Alphabet Businesses

As two tech giants heavily reliant on advertising, Alphabet’s 22% revenue growth is underpinned by a 63% explosive expansion of Google Cloud, the complete reshaping of the search experience by AI Overviews and AI Mode, and AI Max, an AI-native advertising product. In mid-May, Alphabet announced:

• Gemini users reached 900 million
• AI Mode monthly active users reached 1 billion
• AI Overviews users reached 2.5 billion

In mid-May 2026, Ahrefs’ latest research found that Alphabet’s AI Overviews feature led to a 58% decrease in the average click-through rate of top-ranking pages, compared to only 34.5% just eight months prior.

Meta’s Stock Price Fails to Rise Despite Positive News

Both Meta and Alphabet are well aware of the high risks associated with their heavy reliance on advertising revenue. Since their IPOs, both companies have been warned of this inherent risk by Wall Street, and both have consistently strived to diversify their revenue streams. Ten years ago, their market capitalizations were similar. But more than a decade later, the results are clear—Meta has remained almost stagnant, while Alphabet has become a diversified tech giant with multiple strong business engines driving revenue.

Meta faces immense pressure to monetize

Meta’s non-advertising revenue for Q1 2026 is $1.29 billion, including subscription fees and hardware sales such as Meta AI smart glasses and virtual reality headsets. The key point is that it has suffered significant losses for years, let alone profitability. The most notorious and frequently cited example is Zuckerberg’s Reality Labs division, which has consistently failed to generate revenue and has lost over $80 billion in the past five years. Since its inception, the company has relied “solely” on advertising revenue, and even with advertising revenue exceeding $55 billion during the same period, the pressure remains immense.

At Meta’s annual shareholder meeting on May 27, 2026, facing this situation, Zuckerberg not only immediately announced the launch of a paid AI chat subscription service, but also publicly addressed shareholders’ questions about the company’s capital expenditures, comparable to those of the other three giant super data center operators, failing to generate returns. He stated, “If the company’s spending on data centers is too high, leading to excess computing power, we may enter the cloud computing market.” This is because the other three competitors, Amazon, Microsoft, and Alphabet, are the world’s top three demand-side revenue providers, while Meta is only spending money without generating profits, which is clearly unreasonable.

Alphabet’s Powerful Moat in AI

Alphabet has left OpenAI far behind

Launching AI MAX in May 2025, Alphabet has already accumulated hundreds of thousands of advertisers within a year, becoming the “fastest-growing AI search product” in Google’s advertising portfolio. In comparison, ChatGPT only has 600!

Note: AI MAX is a comprehensive suite of ad targeting and ad content enhancement features for “Search Campaigns.” Its two main functions, “Search Term Matching” and “Ad Element Optimization,” utilize Google AI to optimize ads in real time and generate tailored ad content messages to reach customers.

The Key Battle: Gemini 3.o

Two and a half years before the launch of Gemini 3.o, the world’s best AI model was OpenAI’s ChatGPT. However, this changed after Alphabet launched Gemini 3.o in 2026. Even OpenAI CEO Ackman himself admitted that OpenAI botched things!

Leveraging its dominant position as a web search engine, Google quickly and simultaneously launched AI-powered search engine browsing, article summarization, and comprehensive integration of Gemini with search and other technologies, effectively capturing the existing market and user base.

Google invented many foundational AI technologies

Many AI technologies used in the tech world today actually originated from Google. Here are a few important examples:

• The Transformer, the foundation of widely used AI models. As soon as Google invented the Transformer, it was immediately applied to search.
• Following this, BERT (Bidirectional Encoder Representation) was developed, further enhancing Google’s search capabilities.
• Then, MUM (Multi-Task Unified Model) was launched, resulting in a significant leap in search quality during that period.
• Google also created LaMDA (Layered Language Model) as early as 2021, designed for fluent open-ended dialogue with extremely strong contextual understanding capabilities. It can engage in natural, fluent, and logical “free-flowing” conversations with humans on virtually unlimited topics—the technological foundation for almost all current AI chatbots—but it wasn’t the first to market before OpenAI’s ChatGPT. In fact, Google launched AI Test Kitchen at its 2022 I/O conference, powered by LaMDA.

Don’t forget: Geoffrey Hinton, the 2025 Nobel laureate, inventor who discovered the astonishing benefits of GPUs for AI training and propelled Nvidia to the top of the global value rankings, is currently a Google employee.

Google initially invested $300 million in Anthropic in February 2023, followed by a $2 billion investment in October 2023, and a further $1 billion in January 2025. Part of Alphabet’s $10.7 billion net proceeds from equity securities in its third-quarter 2025 profit came from Anthropic.

In November 2025, Google Cloud reached an agreement with Anthropic to supply 1 million dedicated AI chips starting in 2026, providing over 1 gigawatt of computing power in a relatively short period. The contract was worth tens of billions of dollars.

In April 2026, Google announced it would invest up to $40 billion in Anthropic and provide it with 5 GW of computing power. Google would initially invest $10 billion, valuing Anthropic at $350 billion at the time. The remaining $30 billion would depend on Anthropic achieving certain milestones.

In early May 2026, Anthropic signed a massive 5-year, $200 billion AI computing power cloud cooperation agreement with Google, representing over 40% of Google Cloud’s total backlog of revenue orders!

Apple Decides to Adopt Alphabet’s AI Model

Apple and Alphabet have decided to continue their collaboration of over a decade, using Alphabet’s AI model as the default search engine on all Apple devices globally. Except for China, where Alibaba’s AI model is used, Apple will pay Alphabet’s AI model annually, covering all Apple devices worldwide.

This decision by Apple is significant for Alphabet: it signifies that Apple considers Alphabet’s AI model the best in all aspects. Apple has 2 billion active devices globally, and iPhone users are heavy internet users and among the highest-spending mobile consumers.

AI Chips

Major Clients Developing Their Own ASICs

Currently, the ratio of ASICs to general-purpose AI chips in artificial intelligence chips is approximately 2:8. However, without exception, major tech giants are developing their own ASICs or have already launched them, and this ratio will soon change.

CPU Usage to Increase Significantly

According to the latest views of Nvidia, AMD, and Intel in May 2026, all three unanimously stated that as a large portion of future AI workloads shift from data training to inference (AI agents are a primary application example of inference), this change will reduce the ratio of GPUs to CPUs used in AI data centers from the previous 8:1 to 2:1, or even 1:1.

Inhouse-Developed ASICs Success

In addition to its own AI CPU called Axion, Google’s TPU has now reached its eighth generation. Google’s eighth-generation TPU is further subdivided into two types: TPU 8t and TPU 8i, responsible for training and inference respectively.

Google’s TPU has not only benefited the stock prices of alpha and its main designer Broadcom, but also Taiwan’s TSMC and led to a recent surge in MediaTek’s stock price.

External Sales

TPUs are also used by companies such as Apple, Cohere, and SSI for AI cloud computing. The most famous example is Google’s agreement in October 2025 to supply Anthropic with 1 million customized AI chips, worth tens of billions of dollars.

The only weakness is AI coding

How strong are the competitors?

On the authoritative benchmarking platform Code Arena, Alibaba’s Qwen3.7-Max ranked 4th globally and 1st among non-Claude models with a score of 1541.

This latest ranking shows that Qwen3.7-Max is only behind Anthropic’s Claude Opus 4.7 and Claude Opus 4.6 Thinking (3rd place), surpassing top models from Europe and America such as ChatGPT-5.5 and Gemini 3.5 Flash.

Admits AI programming lag behind competitors

In May 2026, during an interview with the renowned New York Times technology podcast, Alphabet CEO Sundar Pichai openly admitted that Google’s only weakness in the field of AI is programming ability. Pichai himself admitted that Gemini currently lags in “agentic coding” and long-horizon tasks, and Google is still catching up on this skill.

Why did we fall behind?

Pichai acknowledged that in the coding field, Google lacks a high-frequency entry point that directly reaches developers, like Anthropic’s Claude Code or Cursor.

To address this weakness, the internal project codenamed “Antigravity 2.0” is highly anticipated. Pichai revealed that the project’s token usage within Google is growing exponentially, doubling every week, demonstrating the model’s enormous potential in real-world productivity scenarios.

Why is AI programming important?

Why is Google CEO Sundar Pichai willing to publicly admit that Google lags far behind its main competitors in AI programming capabilities? Because Anthropic, which is projected to achieve its first quarterly operating profit of $559 million in the June 2026 quarter and whose annualized revenue has already surpassed OpenAI’s, relies heavily on its AI programming solution, Claude Code!

Non-AI Segment Performance

Google Cloud’s Growth Rate is Astounding

Alphabet’s Q1 2026 earnings report revealed:

• Google Cloud (GCP) revenue grew by 63%; compared to its main competitors Azure’s 40% growth and AWS’s 23.48% growth.
• Backlog reached $462 billion, nearly doubling quarter-on-quarter, with 50% of the backlog expected to convert to revenue within 24 months.
• Operating income reached $6.6 billion, a 200% year-on-year increase.
• Operating margin rose from 17.8% in the same period last year to 32.9%.

Note: The Google Cloud performance revealed by Alphabet in Q1 2026 is the primary reason for Alphabet’s surge since the earnings report!

YouTube Becomes Modern Television

Numbers Prove YouTube’s Popularity

• As of May 2026, over 2.7 billion people worldwide use YouTube monthly.
• In May 2025, NSS magazine pointed out that YouTube alone accounted for 12.5% ​​of total television viewership, surpassing Netflix’s 7.5%, Disney’s 5%, and Amazon Prime Video’s 3.5%.
• Globally, people spend almost twice as much time on YouTube as on TikTok—YouTube’s share of global social media user time also exceeds the combined share of TikTok and Instagram. Global users spend nearly 27 hours per month on the platform.
• Revenue Surpasses Netflix for the First Time: In 2025, YouTube’s advertising and subscription revenue exceeded $60 billion, surpassing Netflix’s revenue for the first time.

World’s Largest Media Platform

According to a research report by MoffettNathanson, “YouTube’s revenue reached $62 billion in 2025, slightly exceeding Disney Media’s (DIS) $60.9 billion, making it the world’s largest media platform.”

If YouTube were spun off as an independent company, MoffettNathanson values ​​it between $500 billion and $560 billion. Its value will exceed the combined value of the current five major Hollywood studios: Disney (DIS), Comcast (CMCSA), Warner Bros. (WBD), Sony (SONY), and Paramount Skydance (PSKY).

YouTube’s market capitalization is estimated at $550 billion, while Netflix’s is $520 billion.

Success Factors

YouTube has grown across all age groups thanks to its creator-led ecosystem, which employs an enviable dual-revenue model. It not only combines advertising with a successful subscription business, but the platform is also working to become the central aggregator for all digital video.

The continued development of generative AI will help creators produce more impactful content, which will be more precisely targeted and monetized more efficiently through other AI tools.

Capital Expenditure

Issuing the Largest Bond

Alphabet announced in its Q1 2026 earnings call that it expects capital expenditures to reach $180 billion to $190 billion in 2026. To cope with such massive expenditures, Alphabet issued the largest amount of bonds in the company’s history.

• In early February 2026, Alphabet raised nearly $32 billion in bonds in less than 24 hours, including bonds denominated in pounds sterling, Swiss francs, and US dollars.
• On May 5, 2026, Alphabet issued euro and Canadian dollar bonds, raising nearly $17 billion in total.
• On May 21, 2026, Alphabet issued a total of 576.5 billion yen (approximately $3.6 billion), surpassing Berkshire Hathaway’s record for yen-denominated bonds and breaking the record for foreign companies.

CapEx Proves Profitability

Since last year, most large tech giants have seen poor stock performance, mainly due to investor concerns about massive capital expenditures. However, Alphabet, despite similar astronomical capital expenditures, has demonstrated early returns through its financial reports, exceeding revenue growth expectations, and strong customer orders, while its competitors are still struggling to deliver convincing results to investors.

Please note: Alphabet has proven for several consecutive quarters that all its business units, while investing astronomical amounts of capital expenditure and integrating AI capabilities into all units, have consistently maintained a high growth rate of around 20%. This is an extremely difficult achievement for a company with a market capitalization of nearly five trillion US dollars!

Other Businesses

Alphabet also has numerous unprofitable startups that investors have rarely heard of, which are categorized as “Other Businesses.” Among the most representative are Waymo (autonomous driving) and Sandbox AQ (Quantum Computing), both of which are currently among the industry leaders.

Venture Capital

Alphabet is a large venture capital firm

Investors have forgotten that Alphabet also has a massive venture capital arm, now comparable in size to the top venture capital firms we all know in Silicon Valley. In short, Alphabet is now a mega-cap venture capital firm.

Publicly Listed Companies Portfolio

According to its 13F filing in March 2026, Alphabet holds stock investments in 29 publicly listed companies.

In April 2025, Alphabet stated that its first-quarter profit included an $8 billion unrealized gain from an investment in a private company. According to media reports, the investment target at the time was SpaceX. After SpaceX goes public in June 2026, the investment in SpaceX is expected to bring Alphabet a return of at least $100 billion.

Unlisted Startups

One prominent example of Alphabet’s investments in unlisted startups is Anthropic, which contributed to the $10.7 billion in net equity securities gains included in Alphabet’s third-quarter profit in 2025, mentioned earlier in this article. Alphabet’s net profit for the first quarter of 2026 reached $62.6 billion, a staggering 81% year-over-year increase, primarily driven by gains from its non-business investments. Of the $62.6 billion profit, approximately $28.7 billion (60.25%) came from updates to the value of its holdings in unlisted companies.

Joint Venture

On May 18, Alphabet’s Google and asset management giant Blackstone announced a joint venture to form an artificial intelligence (AI) cloud company dedicated to commercializing Google’s proprietary chips and providing enterprises with computing options beyond Nvidia.

Blackstone will contribute $5 billion in equity to the new company; Google will provide its proprietary Tensor Processing Unit (TPU) and other chips, as well as related software and services. Google veteran Benjamin Treynor Sloss will serve as CEO.

Anthropic’s Strategic Investment

Alphabet May Become Largest Company

Many Wall Street experts have stated that Alphabet may soon surpass Nvidia to become the world’s most valuable listed company. This is because:

• The widespread reach of the internet, the scale of its business, low costs, quick results, and the absence of hardware company limitations.
• Its leading or second-largest position in almost every business segment.
• Alphabet’s global monopoly in internet advertising and search will be a driving force behind its continued market capitalization growth, while artificial intelligence is the latest catalyst for further growth, making its market capitalization virtually limitless.

The Biggest Risk of Investing in Alphabet

Regulatory Oversight in Various Countries

The biggest risk of investing in Alphabet is regulatory oversight in various countries. Due to its clear monopoly, Alphabet is prone to being penalized. Alphabet faces various and ongoing antitrust investigations, investigations, and fines in almost every country in the world. The three largest antitrust cases are two from the United States and one from the European Union. Note that all three antitrust cases are already in effect, meaning Alphabet is now awaiting the rulings from the US and the EU.

Three Antitrust Cases

If it weren’t for Trump’s public opposition to the US ruling against Alphabet before his second term, forcing the suspension of the US antitrust case, and Trump’s threat to impose tariffs on the EU silencing the EU—in other words, all three antitrust cases were suspended due to Trump’s political interference. The suspension doesn’t mean they’ve disappeared; the antitrust cases will resume after Trump leaves office. Investors and Alphabet will still face persistent antitrust issues.

Antitrust Cases Determine Stock Valuation

A reminder to investors: Everyone seems to have forgotten that two years ago, in March 2025, under the shadow of antitrust cases, Alphabet’s price-to-earnings ratio was the lowest among the seven major tech stocks, falling below 17.

Google need to face five key cases

Two US Cases

• Search Engine Monopoly: The US Department of Justice ruled that Google paid to maintain an illegal monopoly on the general search market by obtaining exclusive pre-load rights on browsers and devices.
• Digital Advertising Monopoly: The core issue is that the US government claims Google monopolized the tools publishers and advertisers use to buy and sell online advertising.

Three EU Cases

• Google was fined €2.95 billion by the EU for abusing its dominant position in digital advertising technology.
• The EU is investigating whether Google’s spam search policy lowered the rankings of news media and publishers’ content.
• The EU is also conducting an antitrust investigation into Google’s use of publishers’ and creators’ content in its AI services without providing compensation or allowing creators to opt out.

Closing words

As I’ve always believed, software, not hardware, ultimately determines who becomes the leader in key technologies or industries; new technologies require software to extend their functionality to every end user. Currently, of the world’s top ten listed companies by market capitalization, apart from Saudi Aramco and TSMC, which have no software business, the other eight are technology companies that operate in software or have software businesses (note: Broadcom, Apple, Nvidia, and Tesla all have large software businesses).

The alphabet has once again confirmed my view; this further reinforces the claim that the alphabet is the true king of artificial intelligence.

I am the author of the original text, the essence of this story was originally featured on Money Magazine, Issue of July 2026

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