The bar has been set high for Alphabet, one of the world’s largest companies and a member of the closely watched “magnificent seven.”

The company is best known for its Google internet search dominance and its widely used Chrome browser. Google commands nearly 90% of search market share worldwide, and its Chrome browser has nearly 3.5 billion users.

Alphabet continues to generate most of its revenue from traditional search; however, other parts of its business are increasingly driving growth. Its latest update to Wall Street shows that one of them — Google Cloud — is accelerating thanks to the widespread development of AI chatbots and agentic AI apps.

Alphabet third quarter statistics:

  • Employees:190,167
  • Revenue:$102.35 billion
  • Net income:$34.9 billion
  • Earnings per share: $2.87
  • Stock price: $282
  • Market cap: $3.4 trillion.
    Source: Alphabet SEC filings; TheStreet

Google Cloud is already among the largest cloud data network companies, ranking alongside Amazon’s AWS and Microsoft’s Azure. These top players are known as hyperscalers due to their size and ability to scale rapidly in response to shifting demand.

But Google Cloud is morphing from a traditional data storage provider for governments and enterprises into a network infrastructure company, offering super-fast and efficient chips ideally suited for AI workloads.

The move isn’t the only one that is reshaping Alphabet’s future. It’s also orchestrated one of the greatest comebacks of all time against rival OpenAI’s ChatGPT — successfully positioning itself to profit as more people turn to AI chatbots for answers.

The shifts aren’t lost on Bank of America, one of Wall Street’s most highly regarded investment banks. Its analysts just reset their Alphabet forecast based on the company’s latest update.

Alphabet CEO Sundar Pichai has seen demand for Google Cloud and Gemini surge in 2025.

Image source: Justin Sullivan/Getty Images

Alphabet rides tsunami of AI demand growth

ChatGPT ushered in the modern era of AI. While computer scientists, futurists, and science fiction enthusiasts have long considered AI’s potential, it has only been since the launch of ChatGPT in 2022 that AI has gone mainstream.

ChatGPT became the fastest new app ever to reach 1 million users after its release by OpenAI, unleashing a torrent of research and development, including from Alphabet (GOOGL).

Alphabet’s first attempt, Bard, fell short, but its reboot as Gemini has impressed, turning it into a major rival to ChatGPT. Gemini consistently ranks as the most downloaded app in Apple’s App Store, alongside ChatGPT — even recently displacing ChatGPT for a short period as the most downloaded app earlier this fall.

In the company’s earnings call, Alphabet CEO Sundar Pichai painted a rosy picture for Gemini’s success, noting that it now boasts over 650 million active monthly users. Across Gemini and AI Mode, Bank of America estimates Google has 75 million daily active users, according to a research note shared with TheStreet.

Alphabet’s Google Cloud is also experiencing unprecedented demand due to AI, and this demand isn’t showing signs of slowing down. Exiting the fourth quarter, Google Cloud boasted a backlog of business of roughly $106 billion. Now, they claim a $155 billion backlog.

Google Cloud Revenue (2025):

  • Q3 2025: $15.2 billion, up 34% year over year.
  • Q2 2025: $13.6 billion, up 32% year over year.
  • Q1 2025: $12.3 billion, up 28% year over year.

Google Cloud Operating Margin (2025):

  • Q3 2025: 23.7%.
  • Q2 2025: 20.7%.
  • Q1 2025: 17.8%.

The surging demand for Google Cloud is driven not only by the use of servers, but also by the growing use of Google’s latest AI chips, including Trillium. While Nvidia is the Goliath in the AI chip market, thanks to its massive installed base of H100 chips and growing deployment of its hyper-fast Blackwell chips, Google’s Tensor Processing Units (named to reflect their integration with its TensorFlow open-source machine learning software) are quickly carving out a niche among companies looking to lower costs.

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While its TPUs aren’t as fast and flexible as Nvidia’s Blackwell, they are considerably cheaper, and they are still much quicker than traditional prior-generation alternatives. They’re specifically designed to reduce energy costs and integrate seamlessly within Google’s ecosystem, making it an attractive choice for companies that already heavily rely on Google Cloud.

The ongoing adoption of Gemini (thanks partly to its deep integration with Chrome and Android) and Google Cloud’s backlog, supported by Trillium, provides a clear line of sight for Alphabet’s shareholder-friendly revenue and profit growth.

Bank of America resets Alphabet stock price target

A major concern since ChatGPT’s launch is that AI chatbots will diminish the need for traditional search, posing a significant headwind to Google’s search ad revenue. Alphabet’s integration of AI mode and AI overviews appears to have stabilized Google search, given that business grew 15% year over year in the third quarter, outpacing Wall Street’s consensus estimate for 11% growth.

Bank of America notes that paid clicks increased by 7% compared to 4% in the second quarter, despite the widespread usage and ongoing growth of ChatGPT. That suggests to its analysts that AI is causing more people to search for more things, “expanding the overall information opportunity.”

The analysts are also impressed with Google Cloud and, specifically, Alphabet’s chips.

Altogether, Alphabet’s momentum and line of sight, thanks to its backlog, led Bank of America to recalculate its outlook for earnings, ratcheting its forecast 4% higher for 2026 and 7% higher for 2027.

The increase to its earnings forecast now has Bank of America thinking Alphabet’s stock price could climb to $335 per share, up from a previous target of $280.

The analysts conclude that Google is “well positioned for AI with a leading LLM, proprietary TPU technology and massive user base.”

Although ChatGPT will remain a fierce competitor, they say, “there can be multiple beneficiaries from growing AI capabilities.”

Todd Campbell owns shares in Alphabet stock.