Stock-Split Watch: Is Alphabet Next?

Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) recently reported impressive quarterly earnings to start 2025. But that hasn't done much for its share price, which at this writing is down about 18% on the year.

One move that could provide a boost is a stock split. Several major tech companies, Alphabet included, have split their stocks, and some have gone on to market-beating returns. Could Alphabet try this in hopes of better performance? Let's look at how likely this is and if you should invest in the company regardless.

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Image source: Alphabet.

The most recent Alphabet stock split

Companies use stock splits to lower their share prices by issuing more shares. A stock split doesn't change the underlying value of a company, but it can make the stock more attractive to investors, because shares become cheaper.

Alphabet conducted a 20-for-1 stock split on July 15, 2022, meaning investors received 20 shares for every one share they owned. Before the split, Alphabet was trading at $2,255. Afterward, it traded at a split-adjusted price of about $113, making it a far more budget-friendly investment.

Since then, Alphabet has returned 38%, underperforming the S&P 500 over the same time period. And at the current share price, a stock split doesn't make much sense. Shares aren't so expensive that it's going to drive away investors, which means there's little benefit to a stock split.

While it's impossible to predict when companies will split their stock, you probably won't see Alphabet do so in the near future. But there are plenty of better reasons to consider adding it to your portfolio.

Why Alphabet is one of the top tech stocks

Alphabet is a market leader in several corners of the tech world. Google is by far the most popular search engine, with a market share of nearly 90%, according to StatCounter. Android is the leading mobile operating system, with a 72% market share, and Chrome is the top browser with a 66% market share.

In addition, Alphabet owns YouTube, which was the top media distributor in March. It captured 12% of overall TV viewing, according to Nielsen data, beating Disney+, Netflix, and the other major media companies.

With those products, Google Cloud, and the rest of its services, Alphabet made $90.2 billion in revenue in the first quarter, a 12% increase year over year. What makes the company even more exciting as an investment is its forward-looking approach. Alphabet has consistently invested in emerging technologies. Recently, that has meant a commitment to artificial intelligence (AI) technology, including its Gemini chatbot and its addition of AI Overviews to Google search results.

Alphabet is also the cheapest it has been since 2023. If you like Alphabet's business, then right now is a good opportunity to buy shares at an affordable price.

GOOGL PE Ratio (Forward) data by YCharts

The bear case

Alphabet's stock has dipped for multiple reasons. Last year, a federal judge ruled that Google had built illegal monopoly power with its online search business. A penalty hasn't been decided yet, but the U.S. Department of Justice wants Alphabet to sell its Chrome browser and its advertising business.

The legal process will likely drag on until next year, so Alphabet is in an uncertain position. While penalties could negatively impact Alphabet's business, to what extent is unclear, and the company may still win an appeal.

Alphabet's reliance on advertising is another concern, since that's one of the first areas that businesses cut back during economic downturns. Google advertising accounted for 74% of reported revenue in the first quarter of 2025.

That's a big number, but it's not nearly as big as it used to be. In 2010, 99% of Alphabet's revenue came from advertising. Since then, it has diversified its revenue streams and will likely continue to do so, based on its investments in AI, cloud services (it announced an agreement to buy cloud security platform Wiz earlier this year), and self-driving cars.

A quality tech investment, with or without a stock split

As mentioned above, the odds of Alphabet splitting its stock anytime soon are pretty low. The odds of Alphabet beating the market over the next five years are much higher.

The tech giant has a nice mix of market-leading products and exciting innovations. Its financials are also excellent. Along with its recent revenue growth, the company has $74.9 billion in free cash flow over the trailing 12 months, giving it plenty of money to invest in growth opportunities. And the stock is the cheapest of the "Magnificent Seven" in terms of price-to-earnings ratio. If you're looking for tech stocks trading at a reasonable valuation, Alphabet is worth considering.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Lyle Daly has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Netflix. The Motley Fool has a disclosure policy.