June 19 – Alphabet (NASDAQ:GOOGL) hasn’t kept pace with its Magnificent Seven peers lately, its stock dipped 2% over the past year and down nearly 8% so far in 2025. Investors have been jittery about rising AI competition and what it might mean for Google’s search ad dominance.
But peel back the headlines, and Google still runs the show. Search remains sticky, really sticky. Even when paid to switch to Microsoft’s (NASDAQ:MSFT) Bing, most users went right back to Google, according to a recent Wharton study. It’s not just brand loyalty, it’s decades of data, personal preferences, and deep integration across products like Maps, YouTube, and Chrome that make switching feel like a downgrade.
And while ChatGPT and Meta’s (NASDAQ:META) AI are gaining ground, Google’s own Gemini platform is catching up fast. It now has 350 million monthly users, skyrocketing from just 9 million last October thanks to rollout across Gmail and Search. Behind the scenes, Alphabet’s in-house TPUs give it a serious cost advantage over AI players relying on Nvidia’s (NASDAQ:NVDA) pricey chips.
On the numbers side, Alphabet looks solid. Revenue grew 13% over the past 12 months through March, with operating margins climbing to nearly 33%. Google Cloud led the way with 30% growth and major margin gains. The company pulled in nearly $73 billion in free cash flow last year and returned $62 billion via stock buybacks.
Spending is ramping up, too, capital expenditures are expected to jump 43% this year to $75 billion, mostly to support AI and cloud infrastructure. On the regulatory front, Alphabet is battling several antitrust cases, but a forced breakup of Chrome or ad tech looks like a long shot.
Trading at just under 18 times estimated 2026 earnings, Alphabet looks cheap compared to its big-tech peers. If AI bets start paying off, and Google’s search moat holds, there could be meaningful upside from here.
This article first appeared on GuruFocus.
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