Because Alphabet’s business is so vast and complex, it’s difficult to discuss the pros and cons of investing in Alphabet.
Diversified Businesses and Monopolies
The company with the most users worldwide
Google has 15 products with over 500 million monthly active users, and seven products with over 2 billion monthly active users. It is the company with the most users worldwide.
Search Engine
The only major competitor is Microsoft’s Bing, which has been gaining ground in recent years and increasing its market share. In particular, Microsoft’s Bing is the only Western search engine operating in China, and its recent significant market share increase is truly surprising.
However, Bing’s market share is still on a different scale than Google’s, so there’s no need to worry; Google still holds over two-thirds of the global market share. Google’s search engine remains powerful.
To this day, Google’s search engine and its various derivative services continue to generate the vast majority of the company’s revenue.
YouTube
YouTube has held the top spot in the US for six consecutive months for both TV and streaming video, and it seems unlikely to reverse this trend.
Cloud Computing
Compared to five years ago, GCP has climbed to the third largest cloud computing provider globally and continues to grow rapidly. This achievement is truly remarkable.
Recently, it has secured major contracts from Meta and OpenAI, two of Alphabet’s main market rivals, a testament to its capabilities.
Artificial Intelligence
Top tiers AI player
Over 2 billion people use Google’s AI overview each month, and global query volume continues to climb. Google’s Cloud division, GCP, notably generated $13.6 billion in quarterly revenue, a 32% year-over-year increase, primarily driven by its AI infrastructure and GenAI solutions.
Strong AI capabilities
Many AI technologies currently used in the tech world originate from Alphabet. Here are two examples: the Transformer, the foundation of today’s widely used large-scale AI models. This year’s Nobel Prize winner, Geoffrey Hinton, the inventor who discovered the astonishing benefits of GPUs for AI training and propelled Nvidia to the top of the world’s wealthiest companies, is currently an Alphabet employee. For more details, please see my post, “Geoffrey Hinton, 2024 Nobel Physics winner, inadvertently helped Nvida transform to AI overlord“
Without these two things, ChatGPT wouldn’t be possible today!
Note: Generative pretraining (GP) is a long-standing concept in machine learning applications. However, it wasn’t until 2017, when Google employees invented the Transformer model, that large-scale language models like BERT (2018) and XLNet (2019) became possible.
TPU AI Chip
In late June 2025, rumors surfaced that OpenAI might switch to using Google’s own AI chip to power ChatGPT computations. Although OpenAI quickly denied this the next day, the market doesn’t believe rumors are groundless. This at least suggests that OpenAI has evaluated this option and that Google’s own AI chip is quite competitive. Otherwise, OpenAI, as its biggest rival, wouldn’t be funding its enemy’s growth. In fact, OpenAI did use Google’s own artificial intelligence chips to support ChatGPT operations in the early days of the company.
Sure enough, on September 3, 2025, Fluidstack announced that it would deploy Google’s AI chip in its New York data center.
Google’s own AI chip is called the TPU (Tensor Processing Unit). The TPU (Tensor Processing Unit), an accelerator tailored for AI, has reached its seventh generation. Google’s latest seventh-generation TPU, “Ironwood,” released in April 2025, delivers 4,614 TFLOPs of computing power per chip at peak performance, powering both thinking and inferential models. This is Google’s first TPU designed specifically for inference.
Compared to Nvidia GPUs (such as the H100 and A100) used by OpenAI, Google’s TPU costs only one-fifth as much. Morgan Stanley’s latest annual total cost of ownership (TCO) report for August 2025 indicates that Nvidia’s GB200 maintains the top spot with a profit margin of nearly 78%, while Google’s proprietary TPU v6e pod boasts a profit margin of 74.9%.
As of today, well-known customers that have been publicly reported to use Google’s TPU include OpenAI, Anthropic, Midjourney, Salesforce, Safe Superintelligence, Essential AI, Apple, Lyft, Two Sigma, etc.
A team of analysts led by Luria from investment bank D.A. Davidson stated that the TPU has rapidly caught up over the past year, closing the gap with Nvidia chips and becoming the “best Nvidia alternative.” These analysts, based on interviews with researchers and engineers at Google’s artificial intelligence labs, found that Google’s customized accelerator for machine learning and AI has received widespread acclaim. If Google combined its TPU business with its DeepMind AI lab and spun them off into a new company, the company’s value could reach $900 billion.
Google is clearly iterating internally from Nvidia GPUs to its own TPUs. According to Omdia, Google is expected to order 169,000 Hopper-based GPUs in 2024, ranking last among the top five cloud vendors and about one-third of Microsoft’s order. Meanwhile, Google has already deployed approximately 1.5 million TPUs internally.
Google’s annual TPU shipments are expected to reach 2.5 million units in 2025. Total shipments of the v5 series are expected to reach 1.9 million units, of which v5e accounts for approximately 1.2 million units and v5p accounts for approximately 700,000 units. Total shipments of the v6 series are expected to reach 600,000 units. Currently, only v6e is sold on the market, while v6p will be available in the fourth millionth unit. It is expected that by 2026, overall TPU sales will exceed 3 million units.
The Powerful AI Product Family: Gemini
Alphabet’s AI assistant, Gemini, quickly soared to the top of the US Apple App Store’s free app charts, overtaking OpenAI’s ChatGPT thanks to a new image editing feature called Nano Banana.
An Evercore ISI survey shows that ChatGPT currently has a 53% usage rate, while Gemini’s is 43%. However, Gemini’s high user satisfaction suggests a potential shift in the market landscape.
Capital Expenditure
Due to strong market demand, Alphabet recently increased its capital expenditure budget for this year by $10 billion to $85 billion to add new data center capacity. Capital expenditures in the second quarter increased 70% year-over-year to $22.45 billion.
Q2 2025 quarterly reult
Financial Report Highlights
According to Alphabet, the Q2 2025 result highlights are as follows:
- Revenue: $96.43 billion, up 14% year-over-year, compared to $2.45 billion.
- Operating profit: $31.27 billion, up 14% year-over-year. This includes $33.1 billion from Google Services, up 11.4% year-over-year. Google Cloud’s GCP division generated $2.83 billion, more than tripling year-over-year. Other businesses reported a loss of $1.25 billion.
- Operating margin: 32%, flat.
- Net profit: $28.2 billion.
- Net cash flow from operating activities: up 4.2% to $27.75 billion.
- Free cash flow: down 4.2% to $5.3 billion, primarily due to capital expenditures.
- Cash flow over the past 12 months: $66.7 billion.
- Cash: $95.148 billion, compared to $95.657 billion in December 2024.
Performance of Key Segments
Comparison table of BU performance
| Segment/BU | Quarterly revenue (USD billion) | Annual growth rate |
| Total revenue | 96.43 | 14% |
| Google search | 54.19 | 12% |
| Youtube | 9.796 | 13% |
| Google network | 7.354 | -1% |
| Subscription | 11.203 | 20% |
| Google Cloud | 13.624 | 32% |
| Other bet | 0.373 | 2.19% |
Table 1: Alphabet Inc.’s operating performance by division in the second quarter of 2025 (Figures from Alphabet Inc.’s financial report)
Search
Search revenue reached $54.2 billion, a 12% year-over-year increase. The company continues to roll out new features, such as AI models that integrate chatbots and search into a single interface.
Cloud Computing
GCP, the cloud computing division, is firing on all cylinders. In the second quarter, GCP revenue reached $13.6 billion, a 32% year-over-year increase. Operating profit more than doubled as customers turned to its Gemini artificial intelligence (AI) big model and AI tools to create and deploy their own AI models. Due to strong customer demand, Alphabet stated that data center capacity could be in short supply for a significant period into 2026.
YouTube
YouTube advertising revenue reached $9.796 billion, a 13.1% year-over-year increase.
Google Network
Google Network revenue reached $7.354 billion, a 1.2% year-over-year decrease; it was the only division to experience negative growth.
Other bet
Google’s other businesses, including subscriptions, platforms, and devices, generated $11.203 billion in revenue, a 20.3% year-over-year increase.
Capital Expenditure
Due to high market demand, Alphabet recently increased its capital expenditure budget for this year by $10 billion to $85 billion to add new data center capacity. Capital expenditures in the second quarter increased 70% year-over-year to $22.45 billion.
Regulation, fines, and antitrust cases
Big four tech are currently involved
Except for Microsoft, all four major tech stocks are currently involved in antitrust lawsuits. Antitrust lawsuits are unlikely to resolve within a few years, lasting from three to five years to five to ten years. These cases can have a lasting impact on a company and should not be taken lightly by investors.
Search Engine Antitrust
The antitrust lawsuit began in October 2020, when the U.S. Department of Justice accused Google of abusing its monopoly position in the search advertising market and consolidating its advantage by signing huge pre-set agreements with vendors such as Apple.
The US Department of Justice’s antitrust case against Alphabet Inc. was finalized in August 2024, and the department announced its position in October 2024. To address this issue, the department proposed a 10-year reform plan requiring Google to break up the Chrome browser, divest the Android operating system, end exclusive default settings, and share data. This is currently the biggest risk of investing in Alphabet stock!
Following this ruling came out, Alphabet’s stock price immediately soared 9.14% the next day, setting a new record high; and Apple, which was previously affected by the case, also closed with a surge of 3.81%!
Please see my previous post in detail: “Will Google’s search engine antitrust ruled out has big impact on Alphabet?” and “Why Apple plummeted by Google antitrust ruled a monopoly?“
Not escape unscathed from Search Engine Antitrust
This issue may not resolve within a few years, but will likely last three to five years, or even five to ten years. It will have a lasting impact on Alphabet, and investors should not take it lightly.
Even so, Alphabet didn’t escape unscathed. While the penalties pose no immediate threat, over the long run, the possibility exists for damage to its critical AI business. Digging into the court ruling’s implications can reveal if the tech titan’s AI aspirations face long-term risk.
But another legal stipulation mandates sharing some of Google’s search data with competitors. This is where AI comes in. AI relies on massive troves of data to perform tasks accurately. The court’s decision arms Alphabet’s rivals with ammunition to improve their AI models.
The court’s requirement would deliver Google’s data insights to Microsoft’s Bing search engine, and feed across all the areas where the two corporations compete. But where it can really provide value is in AI.
Microsoft incorporates AI models developed by ChatGPT creator OpenAI into its offerings, since it has a stake in the company. ChatGPT’s introduction of generative AI to the world is one of the key drivers that kicked off the current artificial intelligence frenzy. Adding Google data to the mix could strengthen both Microsoft and OpenAI’s tech.
In fact, the judge who delivered the Sept. 2 ruling, Amit Mehta, noted, “The emergence of GenAI changed the course of this case.”
Advertisement Antitrust
On April 8, 2025, a US court ruled in the advertising antitrust case previously filed by federal prosecutors from the Department of Justice against Google, stating that “Google abused its dominant position in two online advertising markets, violating US antitrust laws.” Please note: This case is unrelated to the Google search antitrust case mentioned in the previous paragraph. The Department of Justice’s ad technology case revolves around Google Network, a Google division responsible for managing the auction-style system through which advertisers purchase digital ad space. The ad technology division chooses where and at what cost to place ads.
Federal prosecutors alleged that Google’s control over ad technology enabled it to illegally resist competition, harming online publishers such as news organizations. The US Department of Justice stated that Google should at least sell its Ad Manager product. The judge agreed. Google argued that it had outperformed its competitors with superior technology.
Before the U.S. lawsuit was filed in 2023, Google had proposed a settlement that would have split its business, which auctions and places ads on web pages and apps, into a separate company, but still under Alphabet. But that proposal was rejected by the Justice Department, which wanted a sale, not a breakup.
Bloomberg reported on September 8, 2025, that Google was once again embroiled in antitrust controversy. Digital advertiser PubMatic filed a lawsuit in Virginia federal court, accusing Google of illegally monopolizing the ad technology market and demanding billions of dollars in damages. This follows OpenX Technologies’ lawsuit filed last month, marking another ad exchange’s legal challenge against Google. On September 16, 2025, another digital advertiser, Magnite, sued Google, accusing it of monopolistic behavior in the advertising trading market.
Compared to the Google search case, this separate antitrust lawsuit poses a lower risk. That’s because it involves advertising tech related to the company’s Google network, which produced $7.35 billion in Q2 sales, a drop from the $7.44 billion generated in the previous year. By comparison, Google search accounted for $54.2 billion of Alphabet’s $96.4 billion in Q2 revenue.
EU’s Antitrust case
The European Commission’s competition watchdog has also ruled that its parent company, Google, has abused its dominant position in advertising technology and ordered it to modify its business model or face fines. However, with Trump’s global trade war in full swing, the EU has held off on immediate penalties, fearing he might retaliate by undermining the transatlantic trade agreement.
However, on September 5, 2025, the EU announced a €2.95 billion antitrust fine against Alphabet for favoring its own advertising services. US President Trump expressed strong dissatisfaction with the ruling and threatened retaliatory tariffs if the EU did not withdraw the fine, which he considered “unjust.”
The EU’s fine against Google follows a string of previous fines against other US companies, including Apple. In 2016, for example, the EU ordered Apple to pay Ireland €13 billion in back taxes and interest.
Regulation and Fines
The French National Commission for Information and Freedoms (CNIL) also gave Google six months to ensure that ads no longer appear between emails in Gmail users’ inboxes without their prior consent and that users give valid consent to create Google accounts for ad trackers. The CNIL stated in a statement that if this is not done, Google and its Irish subsidiary will have to pay a fine of €100,000 per day.
Google is plagued by numerous regulatory and fine-related cases. In November 2024, Canada’s Competition Bureau sued Google, alleging anticompetitive practices in online advertising. In September 2024, Google’s advertising business came under the scrutiny of UK regulators, potentially facing substantial fines or a breakup. In April 2025, Japan launched its first investigation into a US tech giant, finding Google guilty of antitrust violations. In February 2025, China’s State Administration for Market Regulation launched an investigation into Google’s alleged antitrust violations, possibly related to its Android operating system or overseas advertising by mainland Chinese companies. In April 2025, Turkish regulators fined Google $75 million for violating competition law.
Google’s total antitrust fines in the EU over the past decade have reached nearly 10 billion euros.
Risks
OpenAI
Artificial intelligence is both Alphabet’s strength and weakness. The emergence of OpenAI poses a significant threat to many of Alphabet’s businesses. It’s arguable that among the top ten tech companies, Alphabet is the one most impacted by OpenAI.
Google’s Preinstalled Search Bundling banned
A US federal judge’s ruling in the antitrust case against Google on September 2, 2025, also included a ruling regarding pre-installed search contracts: “Google can pay partners to pre-install its products, but it cannot enter into exclusive contracts.”
This could upend Alphabet’s revenue, which is over $26 billion annually at risk, $20 billion of which goes to Apple. Alphabet and Samsung have similar contracts, but the amounts aren’t on the same scale as Apple’s. This represents nearly a quarter of Alphabet’s operating income.
The judge’s ruling on September 2, 2025, prohibits exclusivity contracts but still allows some payments. Even so, Apple’s pre-tax profits could fall by as much as 7%, which is a positive for Alphabet.
The downside, however, is that Google search traffic from Apple could plummet, potentially having a devastating negative impact on Alphabet’s profits.plummet, potentially having a devastating negative impact on Alphabet’s profits.
Note: According to court documents cited by the Search Engine Roundtable, “more than half (50%) of Google’s searches are conducted on Apple devices.” Barron’s further reported that “more than half of Google searches in the United States come from Apple devices,” based on testimony in the Apple-Google antitrust case.
Search Engines
Search engines are seeing a number of emerging challengers, particularly those from new-generation AI startups OpenAI and Perplexity. Leveraging their massive user base of AI chatbots, they’ve already taken a significant portion of Alphabet’s search engine traffic. This is a fact.
Note: Perplexity’s web browser, Comet, has already launched, and OpenAI’s web browser Atlas has released too.
Whether this trend will continue is unclear. In short, in the short to medium term, no competitor can alter the 20-year-old global internet search patterns—this is Alphabet’s greatest advantage, and it’s difficult to change.
Astronomical Capital Investment
Alphabet’s spending in 2025 will be $85 billion, instead of the previously estimated $75 billion. Capital expenditures significantly erode a company’s profits and are generally unpopular with investors, especially at such astronomical levels. For more details on this topic, please see my post a few days ago, “How staggering are 5 Tech giants’ AI capital expense“
Lawsuits and Fines Continue
On September 3, 2025, a jury in a U.S. federal court in San Francisco ordered Alphabet’s Google to pay $425 million in damages to 100 million affected users.
On the same day, France’s data protection authority announced it had fined Google’s parent company €325 million (approximately $381 million) for improperly displaying ads and using cookies to Gmail users without their consent.
Similar cases crop up almost regularly, mostly involving Google’s search engine, violations of user privacy, advertising, online commerce, and mobile app stores. Due to its monopoly position, Google has ignored regulations, forcing governments around the world to impose fines starting in the hundreds of millions of dollars.
Capital Market Performance
Stock Price Performance
Due to the numerous factors mentioned above, even though Alphabet’s recent earnings reports have been strong, its stock price performance is unlikely to be ideal. As of August 27th, its projected return for 2025 is only 9.35%, similar to the S&P 500.
Alphabet shares hit a record high on September 3, 2025, since Alphabet’s IPO on August 19, 2004.
Undervalued
Alphabet has the lowest market valuation among both the top ten companies by market capitalization and the seven largest tech stocks, and is even undervalued, with a price-to-earnings ratio lower than the broader market. Even after the antitrust ruling, the stock price surged the next day, and its price-to-earnings ratio immediately soared to 25! Its current P/E ratio is only around 25, and its estimated forward P/E ratio is still around 21.
As of the close of trading on September 5, 2025, the S&P 500’s current P/E ratio was approximately 30.07, with an estimated forward P/E ratio of around 24. This is also lower than the Nasdaq 100’s current P/E ratio of approximately 34 and an estimated forward P/E ratio of around 27. In short, Alphabet’s current stock price is far below its intrinsic value, and its valuation is even lower than that of major market indices.
This isn’t the market’s fault. It’s primarily because Alphabet currently faces far greater uncertainty than the other top 10 companies or the seven largest tech stocks. Uncertainty is a primary factor influencing valuations. Wall Street and investors in general inherently dislike uncertainty.
Comparison of stock prices and operating figures among mega tech
| ticker | 9/12/2025 stock price | Stock performance in past 1 year | Stock performance in past 5 year | TTM P/E | Forward P/E | 2025 Q2 revenue growth rate | 2025 Q2 earning growth rate | gross margin | operating margin | net margin | ROE | PEG | P/S |
| AAPL | 234.07 | 8.21% | 119.08% | 35.58 | 29.5 | 9.60% | 9.30% | 46.68% | 29.99% | 24.30% | 149.81% | 2.27 | 8.65 |
| AMZN | 228.15 | 23.40% | 54.42% | 34.82 | 29.33 | 13.30% | 34.70% | 49.61% | 11.43% | 10.54% | 24.77% | 2.02 | 3.67 |
| AVGO | 359.87 | 119.41% | 900.47% | 91.93 | 39.06 | 16.40% | 172.70% | 77.17% | 31.76% | 31.59% | 27.08% | 0.59 | 29.05 |
| GOOGL | 240.8 | 52.31% | 231.91% | 26.04 | 22.83 | 13.80% | 19.40% | 58.94% | 32.43% | 31.12% | 34.83% | 1.64 | 7.69 |
| META | 755.59 | 41.69% | 199.21% | 27.4 | 25.58 | 21.60% | 36.20% | 81.97% | 43.02% | 39.99% | 40.65% | 2.06 | 10.96 |
| MSFT | 509.9 | 18.81% | 154.45% | 37.38 | 33 | 18.10% | 23.60% | 68.82% | 44.90% | 36.15% | 33.28% | 2.23 | 13.51 |
| NFLX | 1188.44 | 70.63% | 152.88% | 50.63 | 37.88 | 15.90% | 45.50% | 48.50% | 34.07% | 24.58% | 43.55% | 1.32 | 12.45 |
| NVDA | 177.82 | 52.27% | 1358.74% | 50.61 | 39.68 | 56.60% | 59.20% | 69.85% | 60.84% | 52.41% | 109.42% | 1.33 | 26.54 |
| ORCL | 292.18 | 71.54% | 389.00% | 67.63 | 42.73 | 12.20% | -0.10% | 69.65% | 31.44% | 21.08% | 69.24% | 2.33 | 14.26 |
| PLTR | 171.43 | 372.13% | 1763.37% | 569.69 | 200 | 48.00% | 143.60% | 79.94% | 26.83% | 22.18% | 15.20% | 3.32 | 125.86 |
| TSLA | 395.94 | 74.59% | 168.65% | 229.49 | 156.25 | -11.80% | -16.30% | 17.48% | 4.10% | 6.34% | 8.18% | 7.05 | 15.02 |
| 標普500 | 6584.29 | 16.89% | 98.35% | 30.55 | 22.2 | 6.00% | 12.00% | 44.20% | 27.40% | 12.70% | 23.20% | 2.34 | 3.3 |
Table 2: Comparison of Alphabet’s stock price and operating performance compared to other large tech companies (Figures from Google Finance and Yahoo Finance)
The fourth publicly listed company to reach a market capitalization of $3 trillion
The 4th 3 Trillion company
Alphabet’s stock hit a new high on September 15th, soar 4.49%, surpassing the $3 trillion market capitalization milestone. It became the best-performing stock among the “Big Seven” so far this year, with a 33.0% return year-to-date through September 15th, surpassing Nvidia’s 32.3%.
Closing words
Alphabet is the most profitable company in the S&P 500, with $116 billion in cash over the past four quarters. The company currently has $95.148 billion in cash, ranking fourth among S&P 500 companies, behind Berkshire Hathaway, Apple, and Amazon.
I am the author of the original text, the essence of this story was originally featured on Smart Magazine, Issue of October 2025
Related articles
- “The pros and cons of investing in Alphabet amid AI evolution“
- “Consider Alphabet if you can buy one stock only to retire from it?“
- “Some AI software vendors are starting to make money“
- “Alphabet’s urgent crisis“
- “Will Google’s search engine antitrust ruled out has big impact on Alphabet?”
- “When AWS is no longer impressive“
- “Why Apple plummeted by Google antitrust ruled a monopoly?“
- “DeepSeek routed the global AI and stock“
- “Google’s Willow chip rally related quantum computing stocks. Is it justified?“
- “How staggering are 5 Tech giants’ AI capital expense“
- “Geoffrey Hinton, 2024 Nobel Physics winner, inadvertently helped Nvida transform to AI overlord“
Disclaimer
- The content of this site is the author’s personal opinions and is for reference only. I am not responsible for the correctness, opinions, and immediacy of the content and information of the article. Readers must make their own judgments.
- I shall not be liable for any damages or other legal liabilities for the direct or indirect losses caused by the readers’ direct or indirect reliance on and reference to the information on this site, or all the responsibilities arising therefrom, as a result of any investment behavior.
