We recently published a list of 10 Most Profitable Tech Stocks to Buy Now. In this article, we are going to take a look at where Alphabet Inc. (NASDAQ:GOOGL) stands against other most profitable tech stocks to buy now.
Profitability remains one of the most sought-after traits in the technology sector, yet it is also one of the most complex. It is shaped by a delicate balance of investment cycles, competition, and market perception. While topline growth often takes center stage—driving valuations and attracting top talent—sustained profitability becomes crucial as industries mature, competition peaks, and new investments become necessary for survival. In this ever-evolving landscape, technology companies have mastered the art of balancing revenue expansion with profit growth by diversifying their businesses, building vast customer ecosystems, and continuously enhancing product experiences.
Looking ahead, earnings growth will take on an even greater role in determining valuations, particularly as the breakneck pace of growth begins to slow. Investors will increasingly focus on sustainable profitability rather than just rapid growth. In a January 2024 article, Rob Haworth, Senior Investment Strategy Director at U.S. Bank Asset Management, emphasized that technology companies possess strong earnings growth potential, largely independent of traditional business cycles. He explained:
“What is not clear yet is how companies investing in AI as a way to increase efficiencies or monetize services for end users will benefit from these advancements. We’re in a consolidation phase to figure out what revenue growth will be going forward. If AI helps boost productivity, that will support not only current rising stock valuations but individual prosperity as well.”
Franklin Templeton’s 2025 Technology Outlook echoes this sentiment, predicting another year of strong growth in the sector. The report notes that the “Magnificent Seven”—a group of leading tech giants—delivered exceptional earnings in 2024, outpacing both the broader market and the tech industry itself. While these companies are expected to maintain strong momentum, The firm anticipates that the rest of the sector may start catching up in 2025.
Tech investments are projected to grow exponentially in the coming years, reshaping the profitability landscape. Emerging technologies such as artificial intelligence, quantum computing, and autonomous systems present both immense opportunities and significant challenges. Some companies will achieve sustainable profit margins through strategic pricing and ecosystem advantages, while others will struggle under the weight of fierce competition and heavy reinvestment costs. For investors and stakeholders, understanding these shifting dynamics is key to navigating the ever-changing tech sector.
Our Methodology
To identify the 10 most profitable stocks, we conducted extensive research on U.S.-listed technology and tech-adjacent companies with a market capitalization of at least $2 billion. Rather than relying solely on absolute net income, we refined our selection criteria by focusing on companies with both an operating margin and net profit margin exceeding 20%. This approach ensures that high-margin firms are not overshadowed by larger corporations with higher overall earnings. After applying these filters, we ranked the stocks in ascending order based on their trailing twelve-month net income, with the company reporting the highest net income securing the top position.
Note: All pricing data is as of market close on February 14.
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A user’s hands typing a search query into a Google Search box, emphasizing the company’s search capabilities.
Alphabet Inc. (NASDAQ:GOOGL)
TTM Net Income: $100 billion
Number of hedge funds: 160
Alphabet Inc. (NASDAQ:GOOGL), with $100 billion in profits tops this list. It is the parent company of Google and a pioneer in internet-related services and products, including online advertising technologies, search engines, cloud computing, software, and hardware. The company is also a leading investor in data centers and fiber networks, operating a vast global network of data centers that support its cloud services and other digital offerings. Alphabet Inc. (NASDAQ:GOOG) has an operating margin of 32% and a net profit margin of 29%.
Alphabet Inc. (NASDAQ:GOOGL) continues to strengthen its position in the cloud computing market, which has experienced rapid growth in recent years and is expected to expand significantly in the coming years. The company has been heavily investing in expanding its data center infrastructure to meet the increasing demand for its Google Cloud services. With a focus on AI and machine learning, Alphabet Inc. (NASDAQ:GOOG) is well-positioned to capitalize on the growing need for data processing and storage solutions. The company continues to report strong operating performance with strong growth in cloud revenue, driven by the integration of AI, which is attracting new customers and larger deals. YouTube revenue also continues to show healthy growth. However, Alphabet’s dominance is also subject to regulatory challenges, such as anti-trust lawsuits, which remain a risk.
Alphabet Inc. (NASDAQ:GOOGL) delivered solid Q4 2024 results, although the growth trajectory has decelerated, raising some concerns. The company’s total revenue increased by around 12% YoY, compared to over 13% growth in Q4 2023. Additionally, growth in the search, YouTube ads, and cloud businesses was slower compared to the same quarter last year. Notably, the company announced its plans to invest $75 billion in 2025 to enhance its AI strategy and infrastructure, which was much higher than street expectations of around $60 billion.
Dan Flax, a senior analyst at Neuberger Berman, commented on the results, noting short-term market concerns about the capital expenditure. However, he views the capex as a wise long-term strategic move due to capacity constraints that are hindering the cloud business. Flax stated that Alphabet’s various businesses are still performing well, and AI is enhancing the value proposition for customers. He believes Alphabet Inc. (NASDAQ:GOOGL) remains well-positioned and finds the stock attractive at current levels.
Overall, GOOGL ranks 1st on our list of most profitable tech stocks to buy now. While we acknowledge the potential of GOOGL to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap
Disclosure: None. This article is originally published at Insider Monkey.
