When it comes to internet businesses, perhaps none have become as dominant as Alphabet (GOOGL +0.20%) (GOOG +0.25%). The company seems to have a strong presence in all areas of the technology industry. And its shares continue to reward investors, outperforming the S&P 500 index in 2026.
The future is still bright. I predict that this leading artificial intelligence (AI) stock will double over the coming five years. Here’s the math investors should understand.
Image source: Alphabet.
Pay attention to earnings growth
“In the short run, the stock market is a voting machine. But in the long run, it is a weighing machine,” Benjamin Graham once wrote. The key takeaway from this quote is that over an extended time period, five years in this case, a company’s earnings power will have a meaningful impact on how its shares perform.
Consequently, the most important variable that will propel Alphabet stock to a double by July 2031 is the bottom line’s trajectory. From 2020 to 2025, its diluted earnings per share (EPS) rose by an unbelievable 269%. Between 2025 and 2028, sell-side analysts’ consensus view is that this number will increase at a compound annual growth rate (CAGR) of 16%.
Alphabet’s EPS figure would need to grow at about 15% per year for the stock to double, assuming the valuation remains constant. Based on its past performance and the durable strength and runway of its advertising operations, this is certainly a realistic outcome.
Another possible catalyst could come from valuation expansion. Alphabet shares currently trade at a price-to-earnings ratio of 27.4. They have traded at a multiple above 30 in recent years. A return to this level can enhance investor returns.
Today’s Change
(0.20%) $0.73
Current Price
$371.65
Key Data Points
Market Cap
Day’s Range
$369.20 – $375.20
52wk Range
$180.48 – $408.61
Volume
649.7K
Avg Vol
31.3M
Gross Margin
60.43%
Dividend Yield
0.23%
AI and network effects
It’s hard to precisely forecast how Alphabet’s profits will trend, although there’s a strong likelihood they will be higher in the future. Even without knowing exactly how much, though, investors should consider purchasing this stock.
This business is a leading force in AI, as its capital expenditures are set to total $180 billion to $190 billion in 2026. The chief concern rests on the uncertain return that all this invested capital will produce. However, Alphabet has many ways to monetize its AI outlays, whether through Google Cloud or by leveraging the technology in its various internet apps to boost ad revenue.
Incredible network effects underpin the organization’s wide economic moat. They benefit Google Search and YouTube. Better data and algorithms improve the experience, leading to greater users and usage. This incentivizes the creation of more content, all of which supports advertising capabilities. Google Search and YouTube get better over time.
Alphabet shares have climbed 182% in the past five years (as of July 14). Investors should expect a doubling in the next five years.
