Welsh Conservatives have prevented Labour from winning a majority in the National Assembly.
Labour set its ambitions on gaining a majority - 31 seats or more. Carwyn Jones, Peter Hain and Ed Miliband talked up Labour's chances of winning a majority, while pollsters predicted Labour winning 32 or 33 seats.
Welsh Conservatives increased their share of the vote to win in Labour's key target seats of Aberconwy, Preseli Pembrokeshire and Carmarthen West & South Pembrokeshire.
Welsh Conservatives made gains from all parties including a 10% swing from Lib Dem to Conservative in Montgomeryshire, 2.5% from Labour in Carmarthen West and 8% from Plaid Cymru in Aberconwy.
Welsh Conservatives now hold more Assembly constituencies than ever before and have more elected representatives than at any time since 1983.
The Assembly group is now more representative with four women AMs and a balance between regional and constituency Members.
Catrin Edwards, Chairman of the Welsh Conservative Party, said, "This is an excellent result for the Welsh Conservatives, achieving our highest share of the vote in an Assembly election, increasing our number of seats and overtaking Plaid Cymru to become the second largest party.
"Labour boasted throughout this campaign that they were the only party capable of winning a majority.
"By falling short of winning even the smallest of majorities, Labour has failed to achieve its goal.
"This is a disappointing result for Labour, which fought a negative campaign based on non-devolved issues, which failed to defend their poor record in government.
"Even in 2003, after an unpopular Labour leader had taken the country to an unpopular war in Iraq, Labour won 30 Assembly seats.
"Welsh Conservative candidates have fought a positive campaign based on making Wales a healthier, happier and more prosperous nation.
"Welsh Conservatives have deprived Labour of its elusive majority."
Secretary of State for Wales, Cheryl Gillan said, "Wales is Labour's last outpost yet even here they can't win an overall majority.
"Labour has consistently boasted they'd win a majority in Wales. Their failure to do so is a huge blow to Ed Miliband, Carwyn Jones and Labour.
"This shows Labour is not reviving under Ed Miliband's leadership.
"This is a very good result for the Welsh Conservatives. Once again we've moved forward in Wales, winning more seats and increasing our share of the vote across the country."