Is Google Stock a Buy Ahead of the Launch of Its First AI Glasses?

Meta Platforms’ (META) AI glasses efforts in partnership with EssilorLuxottica (ESLOY) have brought the company a lot of success. The rise of generative AI has meant that what was once a capital-intensive experiment is now a commercially viable business. This became clear when, in May, Alphabet’s (GOOG) Google (GOOGL) committed $150 million to Warby Parker (WRBY), a popular eyewear company. Investors could foresee what the search engine giant was trying to do, and if anyone had any doubts, the recent announcement should help remove them.

Earlier this week, Google announced that it would launch its first AI glasses next year. It is collaborating with Samsung (SMSN.L.EB) and Gentle Monster, in addition to Warby Parker, as mentioned above.

Built with the company’s headphone operating system, Android XR, the glasses will allow users to interact with Google’s Gemini AI assistant, although this interaction will only be audio-based, according to the company. Additionally, it will also launch glasses with a screen on the lens, which will show users things like translations and instructions. The company has not yet announced the exact launch date of these glasses.

Alphabet is an American multinational holding company, famous for its Google search engine, Waymo self-driving cars, Gemini Chatbot, Google Workspace and many other things. It is one of the most valuable companies in the world and is headquartered in Mountain View, California.

GOOGL stock has had an incredible year, generating returns of over 70% over the past 12 months. In comparison, the S&P 500 Index ($SPX) only returned 13.35% over the same period.

Alphabet, along with other hyperscalers, is the reason why many consider the ongoing rally an AI bubble. The company continues to invest in AI and investors are wondering if the returns on investment will be as interesting as the infrastructure investments are. The share price continues to rise in this context, hence the speculation about the AI ​​bubble.

GOOGL is clearly overrated on several metrics. Its forward P/E ratio of 30x is 26.5% above its historical five-year forward P/E of 23.8x. It is trading at a price-to-sales ratio 62% higher than its five-year average. In terms of price to cash flow ratio, the stock is trading at a multiple of 24.29 times, and if you guessed right, this is also a whopping 44% above its five-year average.

The stock is pricing in a lot of future growth and it’s up to investors to decide if they think it’s worth paying the premium. After all, the demand for AI is unprecedented, and if investors want to taste the fruit of GOOGL meeting this demand, they have to take the risk, which in this case comes in the form of overvaluation.

GOOGL announced its third quarter 2025 earnings on October 29. For the first time, the company reported revenue of more than $100 billion for the quarter. It handily beat Wall Street expectations, reporting revenue of $102.35 billion versus an estimate of $99.89 billion and EPS of $3.10 versus an estimate of $2.33.

The demand for AI manifested itself in the cloud segment, which recorded revenue of $15.15 billion against expectations of $14.75 billion. The company expects capital spending in 2025 to reach between $91 billion and $93 billion. However, these investments are likely to increase significantly in 2026, according to management.

Momentum in the use of AI overviews and AI mode continues to be strong. According to the management, users are now realizing that AI Overviews can answer most of their questions. This not only means they have a better user experience, but it is also very positive for Google. If the company can satisfy user queries on its own, it bodes well for AI glasses, where users are more likely to become irritated if they don’t find the right information on the first try, unlike desktop users who are used to modifying their query if they don’t get the answer on the first try.

GOOGL enjoys a consensus rating of “Strong Buy,” with 43 out of 54 Wall Street analysts rating it a “Strong Buy.” No analysts have a “Sell” rating on the stock. The stock is trading fairly close to its average price target of $326. However, the highest price target of $400 still offers 26% upside from current levels.

On the date of publication, Jabran Kundi had no (directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com