HOW GOOGLE BEAT APPLE

What That Means For Big Tech's Next Battle

It’s the second week of 2026, Peaceniks! And the biggest news in tech last week had absolutely nothing to do with CES…

On January 7, Alphabet’s market capitalization overtook Apple’s valuation for the first time this decade.

Except for a few weeks in 2016 and 2019, Apple has always been more valuable than Google aka Alphabet. Until last week.

Yes, markets fluctuate, especially in the current environment. Likely, these two will toggle market caps back and forth – for this year. But, if you pay close attention, there’s plenty of evidence that this Google/Apple lead-change indicates a fundamental re-rating of the market itself.

Here are a DOZEN CHARTS that explain why Google is now more valuable than Apple, why it’s likely to stay that way, and how this will shape the AI Wars.

Apple: The iPhone is 50%+ of Apple’s revenue. This decade, iPhone growth has slowed dramatically. Comparatively, 2025 was a growth year - but that’s mainly because the two previous years sucked hard. When we look at the last five years, we see revenue growth for Apple’s signature product - its center of profit gravity - has stalled.

Google: 75% of Alphabet’s operating income is from search (aka “intelligence”). Absent the lockdown anomaly and ensuing reset, Google’s search revenues have grown at a frothy clip this decade. In 2025, Google’s search revenue grew +16.5% - overtaking Apple’s total iPhone sales for the first time.

That’s because search now represents more than one-fifth of all global ad dollars. And…

Alphabet (aka Google) controls 90% market share of intelligence aka search.

Additionally, in mobile - supposedly Apple’s wheelhouse…

Google aka Alphabet aka Android controls at least 70% of global operating systems, compared to Apple aka iOS’s share of 26%.

It’s important to mention here that Google aka Alphabet pays Apple aka iOS $20 billion per year to be the primary, pre-installed search on all iPhones – revenue that’s “100% gross margin” for Apple.

Apple saw decent net income growth in 2025. Most of that growth came from services - aka Apple TV, Cloud, App Store, etc. - which have much higher margins than hardware. Then remember: Google’s search fees are included in Apple’s services income growth. And…

If Alphabet’s $20+ billion per year is, as the market assumes, “pure profit,” it is fascinating to think of Apple’s net income without it - especially when comparing the companies’ respective net income.

Despite a massive lead by Apple just three years ago, Alphabet saw its net income soar past Apple’s in 2025. Here’s why:

• Alphabet aka Google aka Android aka YouTube aka Chrome aka Gmail aka G-Suite aka Gemini all power a vertically integrated, self-fueling lifestyle flywheel.

• Meanwhile, Apple still has a single product crutch, with an ok service business and zero internal intelligence.

• In a market that prizes intelligence services (likely too much), Apple sells expensive boxes to store intelligence while Alphabet is a self-sustaining intelligence bundle.

☝️☝️ These👇👇 are some reasons that Alphabet aka Google surpassed Apple in market cap last week - the first time since I’ve mapped the Media Universe.

But the reason why Alphabet aka Google will stay ahead of Apple: Of all the tech titans, Google aka Gemini is best positioned to win the AI Wars.

Of all the major AI players, only Google has its AI strategy actually figured out.

Most of the present-day AI Oligarchy rely far too heavily on the universally overhyped “OpenAI recurring revenue model.” Most growth in the AI sector (and the US economy btw) is currently propped up by the trillion-dollar-revolving-back-door-economy-collusion diagramed above. The biggest beneficiaries of the AI hype bubble lend, buy, and sell to-and-from each other to keep AI’s arrows climbing up and to the right.

But, according to Andrew Ross Sorkin “there is no way to truly pencil out the math in what they’re doing. This investment is almost religious.”

On the contrary, Google’s AI model is built entirely on radical vertical integration.

Alphabet aka Google aka Gemini buys its hardware from themself. Unlike platforms who “rent” GPUs from NVIDIA (in exchange for investment from NVIDIA), Google buys TPUs (Tensor Processing Units) they make themselves. This allows Google to deploy massive AI infrastructure investments, while keeping the economics entirely inside Alphabet’s ecosystem.

Google now represents 90% of search. Search is now 56% of Google’s (aka Alphabet’s) revenue. AI is the tech that is replacing search. Rather than trying to sell Gemini to consumers, Alphabet is using the scale of their existing search to replace Google with Gemini. Alphabet aka Google aka Gemini are, at this moment, building the best, most-used AI model in the world, bundled inside a vertically integrated intelligence stack.

This may seem simple or obvious. But Alphabet is the only one doing it at scale or well, despite trillions being spent in the space. And, relatively, no one really seems to be noticing.

“AI has increased advertising revenue for Google. AI features have contributed to an increased growth in overall queries.

AI Overviews ads are monetized at approximately the same rate as ads in traditional search, avoiding revenue cannibalization.

By the end of 2025, AI-integrated features led to a 15% year-over-year revenue growth in search and YouTube advertising.”

- Sundar Pichai (CEO), Alphabet Q3 2025 Earnings Call

Comparably, Microsoft aka Office aka Bing – the only other company currently positioned to battle Google on these terms – is dropping the AI ball all over the place.

They’re “playing the field” with their AI investments and infrastructure, investing heavily in OpenAI, while spending extravagantly on their own, awful homemade model, Copilot.

Their internal strategy appears to be “Agentic Productivity,” or AI as on demand workplace solution. They embed the heck out of Copilot into their Office products. But, let’s be honest, no one likes it. Microsoft lacks the massive, free, ergonomic use case of Google and Gemini – in large part because Bing is irrelevant and Copilot is garbage.

More importantly, Microsoft’s core AI strategy appears to be funding and hyping OpenAI’s unprovable recurring-revenue-subscription-SaaS-based-circle-jerk.

As I warned last week, that circular economy cartel is blowing a bubble which looks bound to burst in ‘26. I am not saying Alphabet will avoid that splash. But the company’s longer view on the AI economy will allow them to float back above the spray, better and faster than the rest.

The big difference: Google is employing their best-in-class AI model as transformational fuel for their existing, dominant, free, ad-driven platform (aka search), while Microsoft, for now, is strategically all-in on OpenAi’s yet-unprovable recurring-revenue-subscription-saas-based-circle-jerk.

As I warned last week, that circular economy cartel is blowing a bubble which appears bound to burst in ‘26. I am not saying Google will avoid that splash. But Alphabet’s longer view on the AI economy will allow them to float back above the spray, better and faster than the rest.

[Amazon’s AI attack is a mix of Microsoft and Apple but lacks Alphabet’s O&O platform. Meta’s AI model mimics Google’s data-for-free-and-ads-for-sale model but misses Alphabet’s paid enterprise bundle. Those are topics for another day!]

Getting back to the initial comparison…

• Apple is in way worse AI position than almost everyone above. Because Apple does not have an AI position. They rent Gemini from Google for $1 billion per year and are embedding ChatGPT into Siri. They’ve committed to spending hundreds of billions on “AI investment” over the next four years. But they can’t really show how that will make them money.

• Simultaneously, Google is transforming into a vertically integrated intelligence bundle – enterprise, productivity, media, advertising, search, and AI. A multi-pronged user-focused flywheel. Unlike the rest of the AI warriors, they aren’t “selling” AI any more than they’re selling “email.” They are using today’s massive search to build tomorrow’s search model.

Those are the reasons, aka the data, how and why Google overtook Apple last week. This data also shows why this moment is more significant than just a stock market horse race.

By the end of 2026, Tim Cook will be out of Apple. He’s been enormously successful. But he has badly missed this moment. Apple is not even in the mix in the AI Wars. Much of this century has been defined by the iPhone and shaped by Apple’s shadow. That era is over. It ended last week.

Conversely, as the data clearly shows, Sundar Pichai has built a perfect ship for the User Centric Era, including the world’s dominant intelligence platform, the world’s biggest video channel, the planet’s largest ad platform, and the world’s most used AI.

That last phrase may turn heads. Because ChatGPT is the world’s most-used direct-user AI app – for AI-only sessions. But we all interact with AI every day, everywhere, as part of other, larger experiences. Gemini is embedded in every search result on Google. There are ten billion searches on Google daily. That is three trillion Gemini interactions per year – paid for by the most profitable search engine in history.

OpenAI is the dominant AI app… today. In 1996, Netscape had 80% market share.

At some point (soon) the bubble-fueled AI merry-go-round that Microsoft is riding will grind to a halt. At that point, they’ll very likely do what they should have years ago: buy OpenAI. Then they’ll embark on the journey Google is on now, but far behind Alphabet aka Gemini.

No one pays for email today. Except almost everyone certainly does in one way or another. Today, no one thinks they pay for search, but search is one quarter of our ad economy. The AI Wars are simply a skirmish in the bigger battle over lifestyle services.

Alphabet aka Google aka Android aka YouTube aka Gemini gets this. Apple had it, then lost sight of it. Members of the AI human-centipede have their heads too far up each other’s sphincters to see it.

Thems the facts behind Google surpassing Apple last week, why I think Alphabet’ll outgrow Apple the rest of this decade, and how Google will win AI.

If you have any comments or questions, and especially if you disagree, ship ‘em! Tell me!

Most of all… Enjoy your week!

ESHAP