Alphabet’s dominance is being challenged as legal authorities continue to force the company towards a Chrome divestiture, but is this all there is to Google’s further growth? Despite so much being at stake with a new administration about to take control of the government, the reward is attractive.
Alphabet Inc. is a multinational technology conglomerate company that owns Google and many former Google subsidiaries. Set up in 2015 in Mountain View, California, Alphabet is a segment leader in its industry that covers search engines, cloud computing, advertising, hardware, and autonomous vehicles, among other sectors. This particular structure helps to focus more on innovation and accountability across the different units of business.
Alphabet’s core products are Google Search, YouTube, Google Ads, Google Cloud Platform, Android operating system, and hardware products like Pixel smartphones and Nest smart home devices. Most of the revenues are from advertising services that come primarily from performance advertising through Google Ads and YouTube ads. Cloud services and hardware sales are also part of the revenue.
Alphabet caters to a diverse set of customers, including consumer users, businesses ranging from small to large corporations, advertisers, and developers. The end markets include service providers in digital advertising worldwide, cloud computing, and consumer electronics. A leader in both online search and advertising markets, Alphabet aims to provide an overall solution that would help bring user engagement as well as business efficiency through multiple interfaces.
According to recent developments. the DOJ could be forcing Google to divest its Chrome browser, but full divestiture is unlikely. Chrome isn’t a money maker in and of itself but lies at the heart of Google’s dominance, pushing traffic to its search engine and improving ad-targeting capabilities. A sale would disrupt Alphabet’s ecosystem, but the Trump administration’s emphasis on U.S. tech competitiveness makes drastic measures improbable. More likely outcomes are softer remedies such as opening Chrome to third-party search engines or ending exclusive deals, ensuring a balanced competitive landscape without gutting Alphabet’s core business.
Alphabet, however, has its own story to tell on the financial front. The giant has demonstrated record-high operating margins at 31% and continuous investments in AI and services like YouTube and Gmail, which will be a growth engine that is unlikely to stall. Analysts are expecting strong earnings growth of 11% in 2025 and 15% in 2026, with the stock trading at a very attractive P/E of 21.9x, far below its historical average. Even with all of these legal uncertainties, Alphabet offers attractive risk-adjusted returns.
I am very bullish on Alphabet. Regulatory hurdles would only create short-term noise while innovation, efficiency, and strategic edge would keep all of Alphabet’s long-term growth intact.
Alphabet Inc. ranks 4th on our latest list of the 31 Most Popular Stocks Among Hedge Funds. As per our database, 202 hedge fund portfolios held GOOG at the end of the second quarter which was 216 in the previous quarter. While we acknowledge the potential of GOOG as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as GOOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article was originally published at Insider Monkey.
