Besides powerful network effects, this leading internet enterprise benefits from its dynamic ability to collect and leverage data.
Shares trade at a slight premium to the overall market, a compelling setup for investors.
The company has its foot on the gas pedal in the artificial intelligence (AI) race, spending more than $90 billion in capital expenditures this year.
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Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG) became a publicly traded company in August 2004. Since that date, it has been one of the best stocks investors could have owned. The share price has climbed 12,240% during that time (as of Dec. 22). The S&P 500 (SNPINDEX: ^GSPC) has generated a total return of 844% over that stretch.
Even after such a monumental gain, this growth stock continues to crush the market, soaring 64% just in 2025. Alphabet is a monster business with a $3.75 trillion market cap. Nonetheless, investors might still want to consider buying shares.
Image source: Alphabet.
It’s not an accident that the company’s stock has done so well. This is one of the best businesses on the face of the planet. One of the most important reasons comes down to the economic moat. Alphabet possesses many durable competitive strengths that play to its advantage, giving it a dominant position in the industries it operates in.
Network effects are certainly at play. Google Search is constantly getting better, as more queries generate more data that’s always refining the algorithm. YouTube is a two-sided ecosystem, with a higher number of viewers and engagement drawing in more content creators, which then improves the user experience. These are positive feedback loops that are hard to stop.
“With 15 products that each serve half a billion people, and six that serve over 2 billion each, we have so many opportunities to deliver on our mission,” CEO Sundar Pichai said in July 2023.
There might be no company out there that collects more data than Alphabet. This is a powerful advantage in today’s internet economy. Imagine the vast amounts of data that the business can leverage to enhance its various apps. This data also helps train Alphabet’s artificial intelligence (AI) models.
Google Cloud benefits both from a cost advantage and from switching costs. Sizable fixed investments are required to scale up the infrastructure needed to serve cloud customers.
Google Cloud was unprofitable for quite some time. However, now it’s producing robust profits. And its customers, who have integrated their own workflows with Google Cloud, are discouraged from changing providers unless they want to disrupt their operations and deal with training and onboarding employees to a new system.
Assume you’re a highly motivated, extremely skilled, very resourceful, and well-funded tech entrepreneur. Your mission is to disrupt Alphabet’s key segments, including Google Search, YouTube, Google Cloud, and Waymo. Where do you even begin?
It’s an almost impossible task that underscores just how dominant this company has become. And for long-term investors, it makes Alphabet a less risky opportunity, since it seems to always be in a position of power.
Successful businesses, especially those with massive market caps like this one, don’t fly under the radar. That’s why it might come as a surprise that Alphabet’s shares aren’t expensive today. Investors interested in adding this growth stock to their portfolios are being asked by the market to pay a price-to-earnings ratio of 30.6.
That’s more expensive than the S&P 500. And it’s a 23% premium to Alphabet’s trailing-five-year average. But the quality of this company is worth the price tag.
Alphabet is humming along. Revenue in Q3 2025 (ended Sept. 30) increased 16% year over year to $102 billion, with net income rising at a faster rate of 33%.
The business has its foot on the gas pedal in the AI race, with forecasted capital expenditures this year of $91 billion to $93 billion, a sizable sum. Alphabet is planning to introduce ads on its Gemini app, which has 650 million monthly active users. This could bring incremental revenue to the mix, giving the company a clear path to monetize all its free AI users.
Sometimes investment opportunities just hit you over the head with how obvious they are. Alphabet is precisely that right now.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
This Growth Stock Continues to Crush the Market was originally published by The Motley Fool
