Should You Buy This "Magnificent Seven" Stock Before 2026?
- - Should You Buy This "Magnificent Seven" Stock Before 2026?
Marc Guberti, The Motley FoolDecember 16, 2025 at 2:52 AM
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Key Points -
Alphabet's high cash flow and strong balance sheet make it easy for the company to invest in innovative AI technology.
All of its key businesses are generating double-digit revenue growth rates, while other "Magnificent Seven" stocks can't say the same.
Alphabet is the most diversified Magnificent Seven stock, and it has several business segments that can turn into multibillion-dollar companies.
10 stocks we like better than Alphabet ›
The "Magnificent Seven" stocks have produced the lion's share of the S&P 500's long-term gains. This group of stocks represents 35% of the S&P 500, and if these seven stocks continue to outperform the index, their presence in the S&P 500 will grow.
Although each of these stocks has been a long-term winner, Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) may be the most promising pick of the bunch.
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It looks like a promising buy in 2026 due to strong financials and long-term artificial intelligence (AI) tailwinds. Alphabet has been a cloud computing and search leader for many years, but it might just become a physical AI leader as well.
These are some of the reasons investors may want to take a closer look at Alphabet in 2026.
High cash flow lets Alphabet invest in more ventures
man touching magnifying glass
Image source: Getty Images
Alphabet isn't the only company that's investing in physical AI, but few companies can compete with its cash flow and steady profits. Alphabet's strong financial position gives it the flexibility to endure losses on start-ups for multiple years before turning a profit.
That's part of the reason why Alphabet has silently emerged as an autonomous vehicle leader through Waymo. Alphabet recently started offering its AI chips to third parties, and it can become a multibillion-dollar segment.
Alphabet has $98.5 billion in cash, cash equivalents, and marketable securities on its balance sheet. The tech giant also brought in $35 billion in net profits in Q3, which was up by 33% year over year.
Google Cloud used to be a small part of Alphabet's overall business. Now, it's one of the three giant cloud providers. Alphabet can experience similar success with Waymo, AI chips, and other parts of its business.
Alphabet has multiple high-growth business
Alphabet doesn't just rely on online ads, which is one of the few downsides of fellow Magnificent Seven stock Meta Platforms (NASDAQ: META). Google's parent company has several businesses like search, cloud, and subscriptions, and they're all growing.
"Alphabet had a terrific quarter, with double-digit growth across every major part of our business," Alphabet CEO Sundar Pichai said in the company's Q3 earnings release.
It was also the first quarter that Alphabet earned $100 billion in revenue. Google Cloud was a major highlight, with revenue up by 34% year over year. That part of the business also has a $155 billion backlog.
Cloud computing makes up roughly 15% of the company's total revenue. As this segment grows, it will make up a larger percentage of total revenue, which can boost Alphabet's total revenue growth rate.
The Gemini app was another key business segment. Alphabet's AI model now has 650 million monthly active users. Alphabet has multiple growth drivers that work well with each other and have delivered excellent results over several years.
Most Magnificent Seven stocks are less diversified
Alphabet is one of the Magnificent Seven stocks driving the S&P 500 to new highs, and it's one of the most diversified companies among the group.
Tesla (NASDAQ: TSLA) heavily relies on automobile sales, with humanoid robots offering significant potential. Apple (NASDAQ: AAPL) heavily relies on iPhone sales, while Meta Platforms generates almost all of its cash flow from online ads. Nvidia (NASDAQ: NVDA) relies on AI chips and software that revolves around its chips.
Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) are the other two well-diversified members of the Magnificent Seven. Both tech giants have competing cloud computing providers and multiple revenue streams.
However, Alphabet is experiencing double-digit growth rates across all of its key businesses. Amazon's online store sales were only up by 8% year over year, excluding foreign exchange rates. That part of Amazon's business accounts for more than one-third of total sales.
Meanwhile, Microsoft only delivered 4% year-over-year revenue growth for its more personal computing segment in Q1 FY26, which made up almost 30% of total revenue.
Alphabet's key businesses are still gaining market share, and AI should accelerate growth rates while resulting in new high-growth segments making a meaningful difference in future earnings results.
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Marc Guberti has positions in Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Source: “AOL Money”
