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After Earnings, Is Alphabet Stock a Buy, a Sell, or Fairly Valued?

With solid results and Google Cloud growth, here’s what we think of Alphabet’s stock.

Malik Ahmed Khan, CFA 1 May, 2025 | 3:16PM
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Alphabet GOOGL released its first-quarter earnings report on April 24. Here’s Morningstar’s take on Alphabet’s earnings and stock.

Key Morningstar Metrics for Alphabet


What We Thought of Alphabet’s Q1 Earnings

Alphabet kicked off 2025 with a set of solid results, with the firm’s sales and operating margins growing 12% and 230 basis points year over year, respectively. Google Cloud continues to be the firm’s growth engine, growing 28% year over year.

Why it matters: Despite the turbulent macroenvironment as well as ongoing antitrust cases and tough competition in generative AI, we were impressed by Alphabet’s continued strong execution, with the firm showing clear progress on the generative AI monetization front.

• In particular, we were impressed with the wide range of monetization angles the firm is creating by leveraging AI, including Google Cloud, Gemini, AI Overviews, and improved ad targeting tools provided to advertisers.

• Beyond advertising, the firm’s public cloud business remains supply-constrained, leading to the deceleration in growth to 28% from 30% in the previous quarter. We expect Google Cloud growth to reaccelerate as additional capacity comes online in the second half of 2025.

The bottom line: We maintain our $237 per share fair value estimate for wide-moat Alphabet and continue to view the stock as materially undervalued even after shares climbed 5% after hours.

• While we believe investor concerns around a tariff-induced digital ad spending slowdown and antitrust-related impact on Alphabet’s business are valid, we think the selloff in the firm’s shares has been overly punitive, creating an attractive buying opportunity.

• We reiterate our view that Alphabet will be able to navigate the antitrust cases against it without material value destruction in its businesses. Also, we expect the firm’s diversified end-market and geographic exposure to insulate its ad business from a sharp decline in ad spending.

Coming up: Despite the ongoing macroeconomic uncertainty, Alphabet restated its intention to spend $75 billion in capital expenditure in 2025. We believe the firm has a lucrative long-term opportunity in generative AI and view these investments as sound.

Alphabet Stock Price

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Fair Value Estimate for Alphabet

With its 5-star rating, we believe Alphabet’s stock is significantly undervalued compared with our long-term fair value estimate of $237 per share. Implying 2025 adjusted price/earnings multiple of 26 times and an enterprise value/adjusted EBITDA multiple of 19 times.

We forecast Alphabet’s top line growing at an 10% compound annual growth rate over the next five years. Drilling deeper into the firm’s various segments, we expect Google Search to grow at a mid to high-single-digit level over the next five years as the digital advertising market matures and growth rates taper off after a robust few years following the pandemic. We expect YouTube to grow at a low-double-digit rate over the next five years with a strong advertising business being increasingly supported by a growing subscription business.

Read more about Alphabet’s fair value estimate.

Economic Moat Rating

We believe Alphabet merits a wide economic moat rating owing to the intangible assets, network effect, cost advantage, and customer switching costs that permeate a variety of businesses that it owns.

While Alphabet’s own reporting operating segments are split up in Google Services, Google Cloud, and Other Bets, we believe that for the purposes of analyzing the firm’s economic moat and durable competitive advantage, a different split is more appropriate. In our moat analysis, we look at Google Search, YouTube, Google Cloud, Android and Google Play, Devices, and Other Bets (which includes Google’s aspirational projects such as self-driving vehicles and internet access).

Read more about Alphabet’s fair value estimate.

Financial Strength

We view Alphabet’s financial position as virtually unassailable. The firm closed out 2024 with cash and cash equivalents of $96 billion, more than offsetting its debt balance of $11 billion. The firm’s advertising business is a cash-generating machine, churning out tens of billions of dollars in free cash flow annually. Alongside advertising, Alphabet is making progress on diversifying its cash generation, with Google Cloud and YouTube subscription sales as additional free cash flow drivers.

Read more about Alphabet’s fair value estimate.

Risk and Uncertainty

We assign Alphabet an Uncertainty Rating of Medium. Our rating reflects our belief that despite the near-term uncertainty around antitrust regulation and potential competition in the AI-infused search market, Alphabet is well-positioned to expand its overall business while maintaining a rock-solid balance sheet.

As we look ahead, we believe Google’s intangible assets and network effects will likely safeguard its dominance in the search space. Further, the firm’s continued investments in AI, which Alphabet can leverage across nearly every business it operates, should be value-accretive. At the same time, however, we do think Google Search’s status as the runaway leader in search could come under pressure primarily due to the antitrust scrutiny. While we don’t see the firm’s market leadership slipping due to antitrust concerns, this issue adds uncertainty to an otherwise stable business.

Read more about Alphabet’s fair value estimate.

GOOGL Bulls Say

• Alphabet’s core advertising business is deeply entrenched in advertising budgets, allowing the firm to benefit from a secular increase in digital advertising spending

• The firm’s advertising business generates substantial cash flows that it can reinvest in growth areas such as GCP, AI-infused search, and aspirational projects such as Waymo.

• Alphabet has a huge opportunity in the lucrative public cloud space as a key cloud vendor to enterprises looking to digitize their workloads

GOOGL Bears Say

• While Alphabet is seeking to diversify its business away from search, text-based advertising remains the largest contributor to the firm’s top line creating a concentration risk.

• Alphabet’s continued investments in new, often unproven technologies, via its Other Bets business have been a drag on cash flows.

• Regulators around the world are keying in on Alphabet’s search dominance and could upend the search market through the imposition of deep, structural changes in the search space

This article was compiled by Jacqueline Walker.


The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Malik Ahmed Khan, CFA  is an equity analyst, technology, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

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