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Is Alphabet Still 1 of the Best Stocks to Buy Now? | The Motley Fool

Is Alphabet Still One of the Best Stocks to Buy Now?

In the ever-evolving landscape of technology stocks, few names command as much attention and respect as Alphabet Inc. (NASDAQ: GOOGL, GOOG), the parent company of Google. As we navigate through 2025, investors are increasingly asking a pivotal question: Does Alphabet still deserve its place among the elite stocks worth buying and holding for the long term? With its dominant position in search, advertising, cloud computing, and artificial intelligence (AI), Alphabet has long been a cornerstone of many portfolios. But recent market shifts, regulatory pressures, and intensifying competition have sparked debates about its future. In this deep dive, we'll explore Alphabet's strengths, challenges, and overall investment thesis to determine if it remains a top pick for savvy investors.

Let's start with the fundamentals that have made Alphabet a powerhouse. At its core, Alphabet's business is built on Google Search, which continues to be the undisputed king of online information retrieval. Despite the rise of AI-driven alternatives like chatbots, Google Search processed over 8.5 billion queries per day in recent estimates, generating the lion's share of Alphabet's revenue through advertising. In the most recent quarterly earnings, Alphabet reported total revenue exceeding $80 billion, with advertising contributing more than 75% of that figure. This isn't just about sheer volume; it's about the ecosystem. YouTube, with its 2.5 billion monthly active users, remains a video juggernaut, pulling in billions in ad dollars from creators and brands alike. Android, powering over 70% of the world's smartphones, ensures Alphabet's influence extends far beyond desktops, creating a moat that's incredibly difficult for competitors to breach.

But Alphabet isn't resting on its laurels. One of the most exciting growth drivers is Google Cloud, which has emerged as a serious contender in the cloud computing arena. Once lagging behind Amazon Web Services (AWS) and Microsoft Azure, Google Cloud has been gaining ground rapidly, thanks to investments in infrastructure and AI integration. In the latest fiscal period, Google Cloud revenue surged by over 25% year-over-year, reaching approximately $10 billion. This growth is fueled by enterprises adopting cloud solutions for data storage, analytics, and machine learning. Alphabet's strategic partnerships, such as those with major corporations in healthcare and finance, underscore its potential to capture a larger slice of the $200 billion-plus global cloud market. Analysts project that by 2030, Google Cloud could contribute up to 20% of Alphabet's total revenue, diversifying away from ad dependency and providing a more stable income stream.

No discussion of Alphabet would be complete without addressing its forays into artificial intelligence. The company has been at the forefront of AI research for years through its DeepMind division, and recent developments like the Gemini AI model have positioned it as a leader in generative AI. Gemini, which powers features across Google products, from Search enhancements to Workspace tools, is designed to compete directly with offerings from OpenAI's ChatGPT and Microsoft's Copilot. Alphabet's advantage lies in its vast data trove—trillions of web pages indexed by Google—allowing for more accurate and contextually rich AI responses. Moreover, initiatives like Waymo, Alphabet's autonomous driving subsidiary, leverage AI for real-world applications, with the potential to disrupt the transportation industry. Waymo's robotaxi services are already operational in select cities, and expansion plans could unlock billions in new revenue. However, AI isn't without its hurdles. Ethical concerns, such as bias in algorithms and the environmental impact of data centers, have drawn scrutiny, but Alphabet's commitment to responsible AI development, including transparency reports and ethical guidelines, helps mitigate these risks.

Financially, Alphabet remains in a league of its own. The company boasts a robust balance sheet with over $100 billion in cash and equivalents, providing ample firepower for acquisitions, R&D, and share buybacks. In the past year alone, Alphabet repurchased more than $60 billion worth of its own stock, signaling confidence in its valuation and returning value to shareholders. Earnings per share have consistently grown, with a compound annual growth rate (CAGR) of around 15% over the last five years. At a forward price-to-earnings (P/E) ratio of about 22, Alphabet trades at a premium to the broader market but is arguably undervalued compared to peers like Meta Platforms or even Apple, given its growth prospects. Free cash flow generation is another highlight, exceeding $70 billion annually, which supports ongoing investments without straining operations.

Of course, no stock is without risks, and Alphabet faces several that could temper enthusiasm. Regulatory headwinds are perhaps the most prominent. Antitrust lawsuits from the U.S. Department of Justice and the European Union continue to loom large, accusing Alphabet of monopolistic practices in search and advertising. A recent ruling in a high-profile case could force changes to how Google operates its app store or search defaults on Android devices, potentially eroding market share. Additionally, the advertising market is cyclical, and any economic downturn could squeeze ad budgets, as seen during the 2022 slowdown. Competition in AI is fierce; Microsoft, backed by its OpenAI partnership, and emerging players like Anthropic are vying for dominance. If Alphabet stumbles in AI innovation—say, if Gemini fails to keep pace with rivals—it could lose ground in this critical area.

Despite these challenges, Alphabet's track record of adaptation is impressive. Remember when mobile search threatened its desktop dominance? Alphabet pivoted seamlessly, and mobile now accounts for over half of its ad revenue. Similarly, in cloud and AI, the company is investing heavily—over $40 billion in capital expenditures last year—to build out data centers and talent. Leadership under CEO Sundar Pichai emphasizes long-term vision, with a focus on "moonshot" projects through the Other Bets segment, which includes ventures like Verily in life sciences and Calico in longevity research. While these bets haven't yet yielded massive profits, they represent upside potential that could pay off handsomely.

From a broader market perspective, Alphabet aligns well with megatrends like digital transformation and the AI boom. The global digital advertising market is expected to grow to $1 trillion by 2030, and Alphabet's 30% share positions it to capture significant gains. Cloud computing is another trillion-dollar opportunity, with AI integration accelerating adoption. Investors should also consider Alphabet's role in the Magnificent Seven stocks, which have driven much of the S&P 500's gains. While volatility in tech stocks is par for the course, Alphabet's diversified revenue streams and defensive qualities—people will always search for information—make it more resilient than pure-play AI startups.

In terms of valuation, let's break it down further. Using a discounted cash flow (DCF) model, conservative estimates peg Alphabet's intrinsic value at around $200 per share, compared to its current trading price in the $170s. This suggests a margin of safety for long-term holders. Dividend investors might note that Alphabet initiated a modest dividend in 2024, yielding about 0.5%, which could grow over time as the company matures. For growth-oriented investors, the potential for stock splits (as seen in 2022) and continued buybacks add to the appeal.

Ultimately, is Alphabet still one of the best stocks to buy now? The answer leans toward a resounding yes, particularly for those with a horizon of five years or more. Its combination of market leadership, innovation engine, and financial strength outweighs the risks. That said, investors should monitor regulatory developments and AI progress closely. Diversification is key—don't put all your eggs in one basket—but allocating a portion of your portfolio to Alphabet could yield substantial rewards. As Warren Buffett might say, it's about buying wonderful companies at fair prices, and Alphabet fits that bill. In a world increasingly driven by data and technology, Alphabet isn't just participating; it's shaping the future. If history is any guide, betting against Google has rarely been a winning strategy. (Word count: 1,048)

Read the Full The Motley Fool Article at:
[ https://www.fool.com/investing/2025/07/25/is-alphabet-still-1-of-the-best-stocks-to-buy-now/ ]