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With a market cap of $2.17 trillion, Google’s parent company, Alphabet (GOOGL), is among the world’s most powerful technology firms. Over the last two decades, Alphabet has evolved from a simple search engine to a diversified giant with dominance in digital advertising, cloud computing, consumer electronics, and artificial intelligence (AI). Despite its massive size and dominance, Alphabet is still regarded as a fast-growing stock with significant upside potential.
GOOGL stock is down 6.3% year to date, while the tech-led Nasdaq Composite Index ($NASX) is up 5.3%.
Let’s take a look at why analysts believe this tech heavyweight has plenty of room to grow and is currently a “Strong Buy.”
Alphabet’s Business Model: A Multi-Engine Growth Machine
Alphabet was one of the few companies to venture into AI before it became a global sensation, and it has now integrated AI across its product line. These integrations aim to increase user engagement, improve ad targeting, and enable enterprise productivity tools, all of which contribute to better monetization. Alphabet’s revenue model is based on several growth engines.
Its flagship business is Google Search, the world’s most dominant search platform. This unit alone generates more than half of Alphabet’s total revenue, primarily from search ads. YouTube, Google Ads, Google AdSense, and the Google Display Network make up Google’s advertising ecosystem, which generates tens of billions of dollars in revenue each year. Search experienced double-digit revenue growth during the most recent first quarter. AI Overviews are now an integral part of the Search experience. The feature now reaches 1.5 billion users per month after being rolled out in 140 countries and over 15 languages.
Alphabet also owns YouTube, the world’s second most popular website and a dominant player in digital video content and advertising. YouTube Music and Premium continue to drive subscription revenue, with more than 125 million paying users worldwide. Shorts, Alphabet’s response to TikTok, saw a 20% increase in year-over-year (YoY) engagement, while monetization through creator partnerships and reservation-based ads doubled from the year-ago quarter.
But Alphabet isn’t just an ad business. The company has made significant investments in cloud computing through Google Cloud, which has emerged as the world’s third-largest cloud provider, trailing only Amazon (AMZN) Web Services (AWS) and Microsoft (MSFT) Azure. Google Cloud reported $12.3 billion in Q1 revenue, a 28% year-over-year increase driven by widespread enterprise adoption of AI solutions. Profitability improved significantly, with Cloud operating income rising to $2.2 billion and margins increasing to 17.8%, up from 9.4% in the last year’s comparable quarter. Alphabet’s pending acquisition of Wiz, a top-tier cloud security firm, demonstrates the company’s commitment to strengthening cybersecurity as multi-cloud adoption grows.
Total revenue increased by 12% year-over-year to $90.2 billion, with diluted earnings per share (EPS) rising 49% to $2.81. Free cash flow for the quarter stood at $19 billion, contributing to a trailing 12-month (TTM) total of $74.9 billion. Alphabet ended the first quarter with $95.6 billion in cash, cash equivalents, and marketable securities.
Despite ongoing AI investments, Alphabet’s priority remains shareholder value creation. During the quarter, the company repurchased $15.1 billion in shares and paid dividends totaling $2.4 billion. The company intends to invest $75 billion in capital expenditures in 2025, primarily to expand data centers and computing capacity for AI products. Nonetheless, it approved a 5% dividend increase and a new $70 billion share buyback program, showing management's faith in Alphabet’s long-term earnings potential and cash generation capabilities.
Other bets businesses such as Waymo (self-driving cars), Verily (life sciences), and DeepMind (AI research) contributed $450 million to total revenue but generated a $1.2 billion operating loss. Waymo’s progress with partners such as Uber (UBER) (ride-hailing in Austin and Atlanta) and Moove (fleet management) supports its commercialization path, despite Alphabet’s lack of commitment to a single revenue model. These are Alphabet’s ambitious projects, which may not be profitable yet but reflect the company’s long-term strategic vision.
Investors are concerned about Alphabet’s competitive position in the AI arms race, which has seen Meta Platforms (META), Microsoft, and Amazon raise the stakes. CEO Sundar Pichai emphasized that Gemini is a platform that includes consumer apps, Search, Workspace, and mobile. While Gemini’s standalone app has 35 million daily active users (DAUs), Alphabet claims that its true reach lies in the 1.5 billion people who already use Gemini-powered features in Search.
From Search and YouTube to Cloud and Subscriptions, AI is increasing engagement, monetization, and operational efficiency. Alphabet’s vast financial resources may propel the next wave of AI growth in the coming decade. GOOGL, which trades at 18x forward earnings, remains a reasonable AI stock to buy right now.
Is GOOGL Stock a Buy, Hold, or Sell on Wall Street?
Overall, on Wall Street, GOOGL stock is a “Strong Buy.” Of the 53 analysts covering the stock, 41 rate it a “Strong Buy,” four say it is a “Moderate Buy,” and eight rate it a “Hold.” The average target price of $200.74 implies the stock can rise by 13% from current levels. Plus, its high price estimate of $250 suggests the stock has an upside potential of 40.7% over the next 12 months.
