Alphabet (ticker: GOOG, GOOGL) faced significant challenges at the beginning of 2025. Despite a 36% stock price increase in 2024, Wall Street viewed the company as trailing behind OpenAI in the AI race, often ranking second or even third.
By year-end, the tables had turned dramatically. Alphabet emerged as the clear leader, while OpenAI CEO Sam Altman declared a "code red" emergency to develop products rivaling Alphabet’s newly launched Gemini 3 AI model—a stark reversal from 2022 when ChatGPT’s debut had forced Alphabet into a similar defensive position.
Alphabet is also closing the gap with OpenAI in core metrics such as monthly active users.
The company’s chip business delivered multiple wins. In October, Anthropic, developer of Claude AI, announced plans to expand its use of Alphabet’s AI chips, deploying up to 1 million processors to power its AI software. Industry reports also suggest Alphabet is in talks to supply custom chips to Meta for running AI products.
These developments contributed to Alphabet’s strong 2025 performance, setting the stage for continued dominance in 2026.
Gene Munster, managing partner at Deepwater Asset Management, noted in a December 11 investor report: "Alphabet will be the top performer among the 'Magnificent Seven' tech stocks in 2026." He highlighted Alphabet’s "unassailable position in building a full-stack AI ecosystem," citing Gemini’s industry-leading capabilities, rapid user growth surpassing OpenAI, seamless AI integration into search, and Google Cloud’s infrastructure resilience.
**AI-Driven Growth Accelerates** Alphabet attributes all AI-related revenue to Google Cloud, which reported a 34% YoY revenue increase to $15.1 billion in Q3, up from 32% in Q2. Cloud also saw a 34% rise in new customers.
CEO Sundar Pichai noted on the earnings call that enterprise AI products are driving revenue, operating margins, and backlog growth. Over 70% of Google Cloud customers now use its AI services, and Q3 saw more $1 billion+ deals than the prior two years combined.
Alphabet has deeply integrated AI into search, launching a ChatGPT-like AI search mode in May with embedded ads. Its viral "Nano Banana" AI photo-editing app in August further boosted engagement, but the true game-changer was November’s Gemini 3 release.
Gemini 3 received widespread acclaim, with Salesforce CEO Marc Benioff publicly switching from ChatGPT. It dethroned GPT-5.1 as the top-rated AI model across benchmarks.
User metrics reflect momentum: TD Securities analyst John Blackledge’s survey of 2,500 U.S. consumers showed Gemini’s monthly active user (MAU) penetration rose from 24% in July to 26% in October, while ChatGPT’s dipped from 36% to 35%. Sensor Tower data revealed Gemini’s MAUs grew 30% from August to December—outpacing ChatGPT’s 15%—partly due to the "Nano Banana" app.
Alphabet’s distribution edge also helps: Gemini comes preloaded on new Android devices, lowering user barriers compared to ChatGPT’s manual access.
**Beyond AI: Diversified Wins** AI wasn’t Alphabet’s only 2025 highlight. While it lost an antitrust case over online ads in April, a September ruling found illegal monopolization in search but rejected demands to divest Chrome. The court also allowed Alphabet to continue paying partners (e.g., Apple’s $20B+ annual deal) for default search placement.
Waymo expanded autonomous services to Miami, Dallas, Houston, San Antonio, and Orlando, while launching highway autonomy in San Francisco, Los Angeles, and Phoenix. Alphabet also unveiled prototype smart glasses and a new Samsung VR headset, both running Android XR.
These advancements position Alphabet for a compelling 2026.
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