"The share price of Alphabet surged to new highs in 2025. Some investors might be hesitant to buy a stock after a 78% rise over the last six months, but the stock still trades at a reasonable valuation. The stock's forward price-to-earnings multiple of 29 is higher than a year ago, but it appears justified given Google's advantages in artificial intelligence (AI)."
"Google has built a competitive advantage in the most disruptive technology ever created. The company has spent years investing billions in chips and data centers for AI training. Its AI chips are a strong draw for customers in Google Cloud seeking an optimal balance of compute performance and cost. Revenue from cloud services surged 34% year over year in the third quarter."
"While dependency on advertising can lead to weaker growth during a recession, Google is building multiple revenue streams across subscriptions (e.g., Google One and YouTube Premium), products, cloud services, and potentially its Waymo self-driving car business. Analysts expect its earnings per share to grow at a 15% annualized rate over the next several years, which should deliver market-beating returns for shareholders."
Alphabet's share price rose sharply in 2025 but still trades at a forward P/E of 29, which appears justified by its AI advantages. The company invested billions in AI chips and data centers, attracting Google Cloud customers seeking performance and cost balance. Cloud revenue increased 34% year over year in the third quarter. AI features are boosting engagement in Google Search, with advertising revenue up 14% year over year last quarter. Google is diversifying revenue through subscriptions (Google One, YouTube Premium), products, cloud services, and potential Waymo commercialization. Analysts forecast roughly 15% annualized EPS growth over the coming years.
Read at The Motley Fool
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