Alphabet reported solid earnings, expected to grow at 10% annually, strong financial position.

From Morningstar: 2025-05-01 11:16:00

Alphabet’s first-quarter earnings report showed solid results, with sales and operating margins growing. Google Cloud remains a key growth engine, growing 28% year over year. Despite challenges, Alphabet showed strong execution in generative AI. The firm’s diversified end-market and geographic exposure help insulate its ad business from declines.

Alphabet’s fair value estimate is $237 per share, significantly undervalued. The firm’s top line is expected to grow at a 10% compound annual growth rate over the next five years. Google Search and YouTube are projected to drive growth. Alphabet’s financial position is strong, with cash equivalents exceeding debt balance.

Alphabet has a wide economic moat rating due to intangible assets, network effect, and customer switching costs. The firm’s financial strength is robust, generating significant free cash flow from its advertising business. While uncertainties exist around antitrust regulations and competition, Alphabet is well-positioned to expand and maintain a strong balance sheet.

Bulls believe Alphabet’s advertising business is entrenched and benefits from digital ad spending growth. The firm has opportunities in public cloud and AI-infused search. Bears point to concentration risk in text-based advertising, cash flow drag from new technologies, and regulatory scrutiny on search dominance.



Read more at Morningstar: After Earnings, Is Alphabet Stock a Buy, a Sell, or…