The key of your misunderstanding is the following sentence:
Assuming the key length is 26
The conceptual mistake you made is that you forgot the unit:
Does "26" mean "26 bits", "26 decimal digits", "26 bytes" or even "26 GiB"?
It should be obvious that there is a huge difference between "26 bits" and "26 GiB".
... and you forgot the unit "bits" in the following sentence, too:
It is known that a cipher has a keyspace of cryptographic algorithm whose key length is $n$ bits is given by $2^n$.
This means that you have to convert the key length to the unit "bits" if it is given in any other unit (such as "bytes" or "decimal digits").
It is quite easy to convert Gigabytes to bits: $1\text{ GiB}=2^{33}\text{ bits}$
However, unfortunately it is rather difficult to operate with these units (bits, bytes ...) when the information is not stored in binary form: In this case the "key length", "storage capacity" or whatever often is not even an integer number of bits.
Example: Some memory that can store 10 decimal digits has a storage capacity of $\frac{10\ln{10}}{\ln2}\text{ bits}\approx 33.22\text{ bits}$.
In your case the length of the key is $\frac{\ln{26!}}{\ln2}\text{ bits}\approx 88.4\text{ bits}$ as fgrieu already explained in his answer.