Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) continues to dominate global markets through its search engine and advertising empire, but a new catalyst is emerging that could drive the company’s next phase of expansion: Google Cloud growth. Analysts at Morgan Stanley recently projected that Google Cloud could grow by more than 50% in 2026, a bold forecast that has reignited investor optimism in Alphabet’s long-term potential.
For years, Alphabet’s story has revolved around advertising, but the acceleration of artificial intelligence (AI) and data-driven solutions is positioning Google Cloud as the company’s most promising division. The question for investors now is whether this potential surge in cloud revenue justifies buying GOOGL stock at current levels.
What’s Fueling Google Cloud Growth?
Morgan Stanley analysts modeled a scenario in which Alphabet’s on-demand business could grow by roughly 15% next year, while its cloud backlog may increase by another $50 billion. If realized, this combination could push Google Cloud revenue growth from around 25% in 2025 to over 50% in 2026.
That’s an aggressive forecast—but not unrealistic. Over the past several years, Google Cloud has built strong momentum as enterprises embrace hybrid and AI-driven infrastructure. With its Vertex AI platform, Gemini large language models, and integrations across Google Workspace, Alphabet is competing head-to-head with Microsoft Azure (NASDAQ:MSFT) and Amazon Web Services (NASDAQ:AMZN).
The company’s ability to link its AI innovations with its cloud offerings gives it a distinct edge. Businesses aren’t just renting storage space—they’re gaining access to AI-powered tools that optimize data analytics, automate workflows, and drive decision-making. That combination makes Google Cloud growth one of the most exciting trends in the market heading into 2026.
Why Alphabet’s Fundamentals Still Impress
From a valuation perspective, Alphabet’s fundamentals remain attractive compared to its peers among the Magnificent Seven stocks. The company’s forward price-to-earnings ratio is close to the broader market average, yet it offers growth potential that rivals smaller, faster-moving firms.
Alphabet also boasts a price-to-cash-flow ratio of about 30, translating to a free cash flow yield of roughly 3.3%. For a trillion-dollar company, that’s a compelling figure—especially since earnings growth could accelerate if Google Cloud expands as projected.
Financially, Alphabet remains one of the most robust tech companies in the world, with industry-leading margins, exceptional return on equity, and a fortress balance sheet. With over $110 billion in cash reserves and minimal debt, the company has ample flexibility to reinvest in AI, expand data centers, and pursue new acquisitions that could further boost Google Cloud growth.
Wall Street Remains Bullish on GOOGL Stock
The bullish outlook isn’t limited to Morgan Stanley. Out of 56 analysts covering Alphabet, the vast majority rate the stock as a “Strong Buy.” The consensus price target sits at $311.06 per share, implying roughly 9% upside from current levels. When factoring in potential dividend expansion, total returns could reach around 10% over the next 12 months.
Citi and UBS have both highlighted Alphabet’s long-term leadership in AI infrastructure, citing its unique position to integrate generative AI directly into enterprise cloud services. If Google Cloud indeed grows by 50% or more next year, it could transform Alphabet from a primarily ad-driven company into a full-scale AI and cloud leader.
Of course, risks remain. Tech valuations across the board are elevated, and macroeconomic pressures—like higher interest rates—could affect capital spending among corporate clients. However, given its strong fundamentals and expanding AI ecosystem, GOOGL stock appears better positioned than many of its peers to weather volatility and capitalize on long-term tech trends.
Bottom Line
Alphabet’s next big story isn’t just about ads or search—it’s about Google Cloud growth. If Morgan Stanley’s forecast proves accurate, Alphabet could be on the cusp of a historic expansion phase, with cloud computing and AI integration driving revenue to new heights.
For investors seeking a balance of stability and innovation, GOOGL stock remains one of the most compelling opportunities among mega-cap tech names heading into 2026.
Featured Image: Freepik
Author Stephanie Bédard-Châteauneuf 
