Alphabet‘s (GOOGL +1.29%) (GOOG +1.58%) dominant position in the internet economy is not a new development. Investors who have owned shares in the tech titan have reaped the profits.
In the past five years, this artificial intelligence (AI) stock has produced a remarkable total return of 212% (as of June 17). This gain is more than double what the S&P 500 (^GSPC +1.08%) was able to put up.
Where will Alphabet stock be five years from now?
Image source: The Motley Fool.
Management is laser-focused on AI
Five years into the future, it’s a virtual certainty that AI will be further embedded in Alphabet’s product and service offerings. Investors only need to follow the money to see what’s happening.
During the Q1 2026 earnings call, chief financial officer Anat Ashkenazi said that Alphabet will spend between $180 billion and $190 billion on capital expenditures (capex) in 2026, effectively doubling last year’s total. She added that “we expect our 2027 capex to significantly increase compared to 2026.”
This money will go to fund the AI infrastructure build-out. Despite being a cash flow machine, the business announced a nearly $85 billion equity capital raise earlier this month to power its ambitions.
Alphabet’s various internet and digital properties, anchored by powerhouses like Google Search, YouTube, and Android, have unrivaled adoption worldwide. And they all benefit from the company’s AI expertise, as their feature sets improve the value proposition for users.
But the segment that’s bolstered the most by AI is Google Cloud, which will contribute more to Alphabet’s financials going forward. Its growth has accelerated as customers increasingly adopt AI tools in their own operations. Revenue soared 63% year over year in the first quarter, with operating income tripling thanks to cost advantages.
Today’s Change
(1.29%) $4.70
Current Price
$368.49
Key Data Points
Market Cap
$4.5T
Day’s Range
$358.69 – $369.46
52wk Range
$162.00 – $408.61
Volume
799K
Avg Vol
30M
Gross Margin
60.43%
Dividend Yield
0.23%
Google’s parent is poised to generate a market-beating return
After watching Alphabet shares surge 106% in the past 12 months, investors may think that they missed the boat. This business now carries a huge market cap of $4.4 trillion. Even so, I believe the Google parent can generate a market-beating return between now and June 2031.
Start with the valuation. Shares trade at a price-to-earnings ratio of 27.7. This might be a low valuation given the company’s huge profits, durable competitive strengths, and growth potential.
Earnings introduce the second variable that affects a stock’s return profile. In the past five years, Alphabet’s diluted earnings per share increased at a stellar compound annual rate of 31%. It’s reasonable to assume this pace will decelerate in the future. However, I believe a 15% yearly clip is a conservative estimate.
If the valuation multiple expands to 30 in five years and diluted EPS doubles, Alphabet’s stock price will rise by 108% between now and June 2031. This forecast should encourage investors to buy shares.
