Is Alphabet Stock a Buy Now?

Investors may struggle with what to make of Google parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG). As the owner of Google's search engine, YouTube, Google Cloud, and other businesses, the company has generated eye-popping amounts of free cash flow.

Nonetheless, ChatGPT and other generative AI platforms have risen in popularity. Although Alphabet has worked to make itself less dependent on the advertising revenue generated from the search engine, that change in market preferences undoubtedly brings uncertainty to the stock, and its price and valuation have fallen in 2025.

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Does that lower price make Alphabet a buy, or should investors stay away as Google Search becomes less popular?

Image source: Alphabet.

The state of Alphabet

Admittedly, Google Search faces its most significant competitive challenge in recent years amid the rise of ChatGPT. According to StatCounter, Google Search's market share has come in at 89% in each of the previous two quarters, the first time since 2015 it has fallen below 90%.

In response, Alphabet developed a competing generative AI platform, Google Gemini, and AI-related results are now available on Google Search. Moreover, when it announced earnings in the fourth quarter of 2024, the company pledged to invest $75 billion in capital expenditures (capex) in 2025 to stay competitive.

However, such moves have failed to appease worried investors so far. Since the beginning of the year, Alphabet stock dropped by almost 20%. Additionally, the company's P/E ratio has fallen to 17, making it the lowest-cost stock in the "Magnificent Seven."

Furthermore, even though Alphabet has made efforts to reduce the importance of advertising to its revenue stream, that process may not have happened quickly enough.

In the first quarter of 2025, advertising made up 74% of the company's revenue, down from 77% in the year-ago quarter. Also, despite owning hundreds of businesses, according to some estimates, the only other business mentioned in the earnings report is Google Cloud. That leaves investors without a clear diversification path for the tech conglomerate.

Is it too early to lose faith?

Nonetheless, Alphabet remains a force in the industry. Despite concerns, it generated $75 billion in free cash flow in the last 12 months, a figure that does not include the capex spending. Between that and its $95 billion in liquidity, the company can likely afford to invest in its businesses.

Among Alphabet's assets is the Android operating system, making it prominent in the smartphone industry. Also, it owns Fitbit, which makes the company critical to fitness enthusiasts and further ties consumers into an Alphabet-owned ecosystem.

Still, one of the more prominent Alphabet businesses not mentioned in the financials is arguably Waymo. A round of fundraising in late 2024 placed its valuation at around $45 billion, according to Bloomberg. Also, partnerships with Uber Technologies and some automobile manufacturers could make Alphabet a force in the lucrative autonomous vehicle industry.

Furthermore, it could potentially spin off some of its businesses. That could give shareholders a stake in additional companies that could better prosper under a separate management team.

Ultimately, between its vast financial resources and positions in numerous enterprises, Alphabet likely has what it takes to remain a force in the tech industry, regardless of whether Google Search maintains its popularity.

Is Alphabet stock a buy now?

When weighing the company's attributes and challenges, Alphabet stock looks like a buy under current conditions.

Admittedly, it is unclear how important Google Search and Google Gemini will be in the future, and the diversification away from ads may not have happened fast enough for most investors.

However, the company's massive cash flows and interests in numerous businesses could allow it to buy or create the innovation it needs to drive its future. When also factoring in its rock-bottom valuation, Alphabet investors could easily profit long-term by buying the stock at today's prices.

Should you invest $1,000 in Alphabet right now?

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Will Healy has positions in Uber Technologies. The Motley Fool has positions in and recommends Alphabet and Uber Technologies. The Motley Fool has a disclosure policy.