Alphabet Stock: Still a No-Brainer Buy in 2025?

The rise of technology companies has truly been the main economic story over the past couple of decades. One business that has been a key part of this trend is none other than Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), parent of Google and Youtube. Since the initial public offering in 2004, its shares have skyrocketed 6,560%, generating some serious wealth for early investors.

Today, Alphabet is a dominant internet enterprise that carries a colossal market capitalization of $2 trillion. So, is this top tech stock still a no-brainer buy in 2025? Here's what investors need to know.

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Image source: Alphabet.

A leader in digital advertising

During the first quarter of 2025, Alphabet generated $67 billion in revenue from its digital advertising efforts. This number represented 74% of the company's total, showcasing just how important this activity remains for the business. Ad sales were up 8.4% in Q1 on a year-over-year basis, driven by growth in Google Search and YouTube.

The fears about how artificial intelligence (AI) chatbots will disrupt Google Search are understandable. But they might be overblown. This segment has nearly 90% global share of the search engine industry. And AI Overviews, now with 1.5 billion monthly users, is monetizing at the same rate as traditional search queries.

There should be plenty of growth for Alphabet to capture. Grand View Research estimates the worldwide digital advertising market will grow at a compound annual rate of 15.4% through the rest of the decade.

The rise of Google Cloud

Google Cloud is becoming more important to the success of the business, as it provides enterprise clients with on-demand IT services. There are some notable customers on the roster. Google Cloud serves Home Depot, Charles Schwab, and Alaska Airlines, for example, highlighting how well the platform is resonating with a powerful clientele.

This segment posted revenue growth of 28.1% in the first quarter. And it's producing quickly expanding profits, with operating income coming in at $2.2 billion, good for a 17.9% operating margin. It's reasonable to expect profitability to improve dramatically as Google Cloud's revenue base scales up, thanks to large fixed costs that can be leveraged. This should boost the company's overall bottom line.

Riding the AI wave

Artificial intelligence has now become a vital part of Alphabet's strategy. The company had its annual developer conference last month, and AI featured prominently among 100 new announcements that were made. This perspective isn't new, as Alphabet has been focused on AI initiatives for two decades.

Advertising customers are obviously critical to the company's financial success. Alphabet uses AI to help them improve their ad campaigns by better targeting specific audiences and by driving efficiencies that can increase return on investment.

Google Cloud is becoming a mission-critical partner for customers that want to use AI. For example, its Vertex AI product allows them to build native applications.

Waymo, Alphabet's autonomous driving division, which just completed 10 million driverless rides, is also leveraging AI. This comes into play when navigating routes or executing a trip.

It's not a shock that perhaps every single business out there is thinking about ways to position themselves for success in an AI world. Alphabet is surely operating like this, just on a much grander scale. To get there, though, will require a lot of money. Just this year, the company plans to spend $75 billion on capital expenditures, mainly to bolster technical infrastructure.

But investors shouldn't worry. Yes, there are concerns about the ultimate payoff of these sizable investments. However, Alphabet brought in $36 billion in operating cash flow just in Q1. And as of March 31, it had a whopping $95 billion in cash, cash equivalents, and marketable securities on the balance sheet, compared to just $11 billion of long-term debt.

There aren't many companies out there that can afford what Alphabet is doing. This should give it a notable advantage as AI progresses in the years ahead.

Investors are staring at a good deal

There is no shortage of reasons to appreciate this business. Even in 2025, after an incredible run for the stock over the years, Alphabet looks like a good deal. That's because the valuation looks too attractive to pass up. Shares trade at a forward P/E ratio of 17.5 right now. This is a no-brainer buying opportunity for investors.

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Charles Schwab is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Home Depot. The Motley Fool recommends Alaska Air Group and Charles Schwab and recommends the following options: short June 2025 $85 calls on Charles Schwab. The Motley Fool has a disclosure policy.