Alphabet 2028: The Pivot From Ads to AI Infrastructure

Introduction: Decoding the Giant

As an enthusiastic investor, I enjoy cutting through market noise to think and model what the data actually says about a business's future.

Alphabet (Google) is the perfect case study for this because it is such a complex enterprise.

My sources include the Q3 2025 Financial Report and Gemini 3.0 launch materials, cross-referenced with strategic reporting from Bloomberg and DA Davidson.

Finally, I will combine this qualitative research with a quantitative data analysis.

Two methodological approaches which I use in the forecast Alphabet's trajectory:

1. Strategic Segment Analysis: Modeling the revenue mix shift from Search to Cloud.

2. Probabilistic Forecasting: Using Meta’s Prophet model to predict total revenue trajectory.

 Short Summary:

Q3 '25 Revenue broke $102.3B, driven by 33.5% Cloud growth and 15% YouTube growth.

• The Secret Sauce in AI field: 

  Googles own custom TPUs can provide a structural cost advantage, defending gross margins compared to competitors dependent on Nvidia GPUs.
  

• The Forecast - future revenue structure: 

  My probabilistic prediction model (using Meta's Prophet) suggests Cloud revenue will exceed $100B (20% of sales) by 2028. Fundamentally reshaping the company’s revenue structure and gradually reducing its dependency on the advertising business. This shift may also influence how the stock is valued in the future.

1. The Strategic Thesis: The TPU Cost Advantage

Most analysis focuses on the Front End (Gemini vs. ChatGPT). I believe the decisive battlefield is currently moving also to the "Back End" (Compute Cost). Alphabet’s biggest advantage in AI era may be full stack approach and Tensor Processing Units (TPUs).

• The Competitors: Microsoft and OpenAI rely heavily on purchasing Nvidia GPUs, paying a significant margin premium.

• Google Advantage: Alphabet designs and runs its own Tensor Processing Units (TPUs).

• Google Disadvantage: Google Cloud and TPUs are still quite closed ecosystem. There is always risk that Google ends up an isolated island while rest of the world is building apps using Nvidia standards.

Why this matters: As Generative AI shifts from training to inference, compute becomes the primary Cost of Goods Sold (COGS). Google’s ability to access compute "at cost" creates a structural margin defense. This allows them to price aggressively to capture enterprise market share while protecting profitability. There is also rumours that Meta would be interested to buy TPUs.

According Bloomberg, "..Meta is planning to use Google’s chips in its data centers in 2027."

Comparison of Total Cost per Hour for Google TPUs and NVIDIA GPUs. Source: https://www.rohan-paul.com/p/semianalysis-on-google-tpu-vs-nvidia

2. Search & Gemini 3.0: From Chatbots to Agents

Search is not melting; it is evolving. With $56.56B in Q3 revenue (+14.5% YoY), the core business challenges the Zero Click bear case. However, the nature of the product is shifting fundamentally with Gemini 3.0.

• Shift to Agents: Gemini 3.0 is no longer just retrieving text; it is performing actions (reservations, purchases). This allows Google to leverage its massive ecosystem (Search, Android, Chrome, Maps, Youtube) in a way standalone models cannot.

  
  

• "Circle to Search" : Can be an example of defensive moat is Android integration. "Circle to Search" captures commercial intent even when users are on competitor apps (like TikTok), turning passive consumption into active transaction revenue. A user watching a TikTok video can circle a pair of sneakers and instantly be taken to a Google Shopping.

  

  
  

• Reality Check: While Google is closing the gap, it is still chasing. Gemini’s 73M monthly downloads still trail ChatGPT’s 93M (Source: Bloomberg). The company must also manage the higher cost structure of generative answers without eroding margins.

3. YouTube: Media Cornerstone, Data Engine and growth driver

While Cloud provides infrastructure growth, YouTube provides media growth. Q3 Revenue of $10.26B (+15% YoY) confirms it is a cornerstone asset.

• Connected TV: According to Nielsen data, YouTube is winning Connected TV in the U.S. Youtube will provide growth for long time. It is effectively becoming the new Cable TV.

Nielsen: The Gauge - Connected TV

Key Strategic Wins:

1. Connected TV: 

   • Nielsen data confirms YouTube is the #1 streaming platform on TV screens in the US. This matters because "tv screen" ad inventory commands higher prices (CPMs) than mobile ads.

2. The Hidden Asset (Multimodal Data): 

   • As AI models become multimodal (Video/Audio/Text), YouTube’s library becomes the world's most valuable training dataset.

3. Shorts monetization: 

   • The company confirmed that YouTube Shorts have reached monetization parity with traditional video. The volume headwind has become a revenue tailwind but TikTok is still controlling mobile.

4. The Revenue Mix Shift (2025–2028)

To understand what Alphabet Revenue Mix could look in 2028, I first modeled the near-term baseline using a Segment Analysis. Total revenue hides the divergence between the "maturing" Ad business and the booming Cloud business.

The 2025 Baseline (My Estimate): Based on current run rates and Q3 data, I estimate 2025 Total Revenue at $379.5 Billion.

Segment	My Baseline for (2025)	Wall Street Run Rate (Based on Q3 2025)
Cloud	60,6	60,8
Other	51,6	51,6
Ads	267,3	285
Total	379,5	397

4.1 Forecasting 2028: The "20% Cloud" Scenario

Based on current growth velocities (CAGR), I have modeled the revenue mix for the year 2028 to visualize the company's future structure. Total revenue:

The Model in short:

1. Advertising: 

   • The model assumes ad revenue growth stabilizing at around 5%. Under this scenario, advertising would account for only 62% of total revenue in 2028.

   • This would represent a significant cooldown compared to today: for context, Q3 delivered a strong +14.5% growth with no signs of stabilization yet.

   • I believe the share of advertising will gradually decline from the current ~75% to below 70%, shifting Alphabet toward becoming more of an infrastructure-driven company.

     
     

2. Cloud: 

   • Cloud revenue is modeled at a ~22% compound annual growth rate, a moderation from today’s rapid +33.5% pace.

   • Under this assumption, Cloud would represent 22% of the revenue mix in 2028.

3. Other: 

   • “Other” segments continue to grow at double-digit rates.

   • While this may give them slightly too much credit, the model results in 16.3% of total revenue coming from Other by 2028.

     
     

The Result: By 2028, Google Cloud will likely exceed $100 Billion in revenue, representing 20% of total sales.

Why this matters for investors: Cloud revenue is recurring and sticky. Wall Street typically assigns a higher valuation multiple to Cloud revenue (e.g., 8x-10x Sales) compared to "Ad" revenue (e.g., 4x-5x Sales). As the revenue mix shifts toward Cloud, the company's P/E ratio could structurally expand.

5. Technical Forecast: Validating with Prophet

Methodology: Time-Series Modeling with Meta's Prophet.

Year	Bear Case	Base Case	Bull Case
2025	111.2	115.1	118.9
2026	440.3	459.7	479.5
2027	466.1	504.9	546.1
2028	496.0	558.5	628.1

To validate my "20% Cloud" thesis, I built a forecasting engine using Meta´s Prophet model. Unlike standard regression, Prophet is designed for business time-series data and explicitly models uncertainty.

The Results (2028 prediction):

Bear Case : $496,0 Billion

Base Case : $558,5 Billion

Bull Case : $628,1 Billion

The Verdict: Even in the pessimistic "Bear Case" scenario modeled by Prophet, Alphabet’s revenue trajectory supports the infrastructure pivot. The algorithm identifies a strong underlying growth trend that persists despite potential market volatility.

6. Final Verdict: The Valuation Re-Rating

The data points to a clear conclusion: Alphabet is successfully executing a pivot.

• The Base Case (Cloud Pivot): As the revenue mix shifts to >20% Cloud, Alphabet deserves a higher multiple. Cloud businesses typically trade at 8–10x Sales, while Ad businesses trade at 4–5x Sales. This alone justifies a significant re-rating.
  

• The Bull Case (TPU-as-a-Service): There is a hidden "call option" in the stock. Analysts at DA Davidson estimate that if Google captures just 20% of the external AI chip market (selling TPUs to giants like Meta), the chip business alone could be worth $900 Billion. This would transform Google into the "Intel of the AI Age."
  

• Final Thought: Alphabet is not winning the AI race solely because of a chatbot. It is winning because it is the Full Stack AI Infrastructure: It owns the Chips (TPU), the Data (YouTube), and the Cloud.

  
  

  Crucially, this stack is backed by decades of computing heritage and the world's deepest bench of AI talent (DeepMind). It is this unique combination of proprietary infrastructure and institutional knowledge that creates the ultimate moat for the next decade.

If you would like to read more about technical solution, here is the case study more technical approach :

Case Study: Strategic Revenue Forecasting for Alphabet (2025–2028)

Disclaimer: The content provided in this analysis is for educational and informational purposes only. It does not constitute financial, investment, or legal advice. The forecasts and scenarios presented are based on probabilistic modeling and personal assumptions, which may not materialize. Investing in the stock market involves risk, including the loss of principal. Readers should conduct their own due diligence and consult with a certified financial advisor before making any investment decisions. I am not a financial advisor, and I hold no responsibility for any financial losses or damages resulting from the use of this information.