Alphabet GOOGL
What does Alphabet do?
Alphabet is the parent company of Google and bundles a broad portfolio of digital services. Its core business is Google Services, with the search engine, YouTube, Android, Chrome, Gmail, Maps and Play. The predominant share of revenue comes from advertising delivered through search, video platforms and partner networks. Additional income comes from subscriptions, app sales, digital content and devices.
In the Google Cloud segment, the company offers computing infrastructure, data platforms, security solutions, collaboration tools and AI applications for usage-based fees and subscriptions. Other Bets comprises early-stage projects such as autonomous driving and life sciences. Competitively, Alphabet benefits from enormous user reach, its own data infrastructure and in-house AI research. Competitors include other advertising platforms, cloud providers such as Amazon and Microsoft, and new AI-based search offerings.
Score profile
Rank vs. Internet Content & Information (15 companies). 10 = top of the group, 5 = middle. Calculated from the metrics below, without AI.
Metrics compared with the industry
On profitability and quality, Alphabet ranks above average in the group Internet Content & Information (7.0/10). On growth, the company ranks above average in the group Internet Content & Information (6.3/10). On valuation (higher = cheaper), the stock ranks in the bottom fifth in the group Internet Content & Information (1.5/10). On financial strength, Alphabet ranks in the middle in the group Internet Content & Information (4.3/10).
| Metric | Stock | Group median | Ranking |
|---|---|---|---|
| Forward P/E | 18.6x | 10.1x | better than 10 % |
| Trailing P/E | 15.0x | 14.9x | better than 42 % |
| PEG ratio | 1.0x | 0.8x | better than 25 % |
| EV/EBITDA | 18.6x | 11.2x | better than 17 % |
| Price/sales | 7.5x | 2.3x | better than 10 % |
| Price/book | 5.4x | 2.4x | better than 18 % |
| Revenue growth | 24.7% | 11.4% | better than 87 % |
| Earnings growth | -25.3% | 0.0% | better than 40 % |
| Gross margin | 60.9% | 75.9% | better than 20 % |
| Operating margin | 31.8% | 16.4% | better than 80 % |
| Net margin | 50.0% | 13.5% | better than 93 % |
| Return on equity | 44.3% | 14.4% | better than 87 % |
| Debt/equity | 22.2% | 22.2% | better than 47 % |
| Current ratio | 2.8x | 2.3x | better than 73 % |
| Free cash flow yield | 0.0% | 8.4% | better than 10 % |
| Dividend yield | 0.3% | 1.0% | – |
| Payout ratio | 4.5% | 17.1% | – |
| Beta | 1.23 | 1.23 | – |
Valuation: what is Alphabet worth?
Two valuation approaches – a discounted cash flow model and a valuation at the industry’s median multiples – give Alphabet a model range of 155.39 USD to 175.86 USD per share.
53 analysts, average rating “Strong buy”, average price target 400.37 USD (+39.3%).
The full DCF matrix, the reverse DCF (what growth the price implies) and scenarios are part of the Pro analysis.
What the business depends on
- Advertising revenue depends on usage intensity in Search and YouTube, as well as on the economy and advertisers' budgets.
- Demand for cloud services and AI infrastructure determines growth and, increasingly, profitability of the Cloud segment.
- Economies of scale, data center efficiency, and discipline in investment and personnel costs shape the group's profit margins.
Risks
- Antitrust proceedings and regulation in the US and the EU could restrict business practices, distribution agreements and default placements.
- AI-based answer systems could change search usage habits and put pressure on the traditional advertising model.
- High investment in data centers and AI chips weighs on free cash flow if demand falls short of expectations.
What to look for with Alphabet
Operating income by segment is particularly informative because it shows whether Cloud and Other Bets complement or burden the highly profitable advertising business.