As part of one of my ongoing £10-a-week investment challenge, on this occasion, for growth stocks I’ve carefully selected my next choice which is more than known by everyone, Alphabet Inc. (NASDAQ: GOOGL) as my 12th pick. Alphabet’s dominance in digital advertising, its powerful AI capabilities, and its robust financial position make it a compelling choice for long-term growth. In this article, I’ll break down Alphabet’s business strengths, recent financial performance, future growth potential, and why now could be the perfect time to invest.
Just before we go deeper in the article, this a reminder of our current challenges that we are doing weekly, one for growth stocks and the other focusing on dividend stocks if you wish to follow. Now, time to review Alphabet!
Company Overview: What is Alphabet Inc.?
Alphabet Inc. is the parent company of Google, the world’s largest search engine. Beyond Google Search, Alphabet operates multiple high-growth businesses such as YouTube, Google Cloud, Android, Waymo (its autonomous driving division) and also quantum computing with their recent release of Willow. The company’s extensive ecosystem touches billions of users daily, making it a tech powerhouse with incredible revenue streams.
Alphabet’s core business revolves around digital advertising, but its investments in artificial intelligence (AI), cloud computing, and hardware development are driving additional growth opportunities.
Alphabet’s Recent Financial Performance: Strong Earnings and Momentum
In its most recent Q4 2024 earnings report (released in January 2025), Alphabet delivered impressive results that outperformed analyst expectations.
- Revenue: $86.3 billion (up 13% year-over-year)
- Net Income: $21.1 billion (a substantial increase from $16 billion in Q4 2023)
- Earnings Per Share (EPS): $1.64 (beating Wall Street’s forecast of $1.58)
- Google Cloud Revenue: $10.6 billion (up 26% year-over-year)
- YouTube Ad Revenue: $11.8 billion (up 15% year-over-year)
These results reflect Alphabet’s ability to adapt and thrive, even amid economic uncertainty. The strong performance in Google Cloud and YouTube highlights the company’s ability to diversify revenue streams while maintaining dominance in digital advertising.
The Role of AI in Alphabet’s Growth Strategy
Alphabet’s advancements in artificial intelligence are shaping its future growth. The company’s AI model, Gemini, has positioned Alphabet as a leader in the generative AI race. Google is integrating Gemini into various services, including Search, Google Cloud, and Workspace, enhancing productivity and user experience.
In addition, Alphabet’s AI-driven advertising tools are helping businesses optimise campaigns, leading to stronger revenue growth. AI advancements are expected to remain a major catalyst for Alphabet’s future success.
Is Alphabet (GOOGL) a Good Buy Now?
Many investors are asking: Should I buy Alphabet stock now? The answer lies in its valuation, growth prospects, and strategic position in high-demand industries.
- Forward P/E Ratio: Alphabet’s forward price-to-earnings (P/E) ratio currently stands at 22x, which is reasonable considering its consistent earnings growth and dominant market position. It is the smallest of the Magnificent 7, so we believe that is a good chance of being undervalued.
- Cash Reserves: Alphabet holds over $120 billion in cash, giving it significant flexibility for acquisitions, stock buybacks, and innovation.
- Growth Potential: With YouTube, Google Cloud, and AI integration gaining momentum, Alphabet is well-positioned to deliver continued revenue growth.
Where Will Alphabet (GOOGL) Be in 5 Years?
Looking ahead, Alphabet’s diverse revenue streams and focus on high-growth sectors suggest strong future potential. Analysts predict that Alphabet’s key drivers over the next five years will include:
- Increased Digital Advertising Spend: As businesses invest more in online marketing, Alphabet’s dominance in search and YouTube ads will drive revenue growth.
- Cloud Expansion: Google Cloud’s rising market share positions it to challenge Amazon Web Services (AWS) and Microsoft Azure.
- AI Innovation: Alphabet’s heavy investments in AI will enhance Search, advertising, and enterprise services.
- Hardware Growth: Google’s Pixel devices and smart home products are also gaining traction, adding another revenue stream.
With these growth drivers in place, analysts expect Alphabet’s stock to see significant upside by 2030, making it a solid long-term investment.
Analysts’ Price Targets for Alphabet Inc. (GOOGL)
Wall Street analysts are overwhelmingly bullish on Alphabet’s stock following its strong earnings report. Out of 50 analysts, 45 have rated GOOGL as a “Buy,” while 5 rate it as a “Hold.”
- Average 12-month price target: $215.88
- Highest target: $235
- Lowest target: $184
With Alphabet currently trading around $167, this suggests potential upside of over 10% just to reach the lowest price target and of nearly 30% to reach the bullish case.
The Importance of Alphabet’s ‘Buy Now, Pay Later’ Expansion
One exciting development is Alphabet’s upcoming expansion into the Buy Now, Pay Later (BNPL) space. By integrating BNPL options directly into Google Pay, Alphabet aims to tap into a fast-growing market segment. This move could attract more users to the Google ecosystem and provide additional revenue streams.
The BNPL market is expected to grow significantly over the next decade, and Alphabet’s entry could be a strategic win to drive transaction volume and boost advertising revenue through enhanced e-commerce visibility.
Alphabet’s Competitive Edge
Despite facing competition from Microsoft (MSFT), Amazon (AMZN), and Meta Platforms (META), Alphabet maintains key advantages:
- Dominance in Search: Google controls over 90% of the global search market.
- YouTube’s Reach: With over 2.7 billion monthly active users, YouTube is a powerful growth engine.
- Cloud Innovation: Google Cloud’s strong growth trajectory is rapidly closing the gap with AWS and Azure.
- AI Integration: Alphabet’s Gemini AI model enhances Search, advertising, and cloud services.
Potential Risks to Consider
While Alphabet’s outlook is promising, there are risks to factor in:
- Regulatory Pressure: Alphabet faces ongoing scrutiny from global regulators regarding data privacy, advertising dominance, and antitrust concerns.
- Advertising Slowdown: As Alphabet relies heavily on ad revenue, a slowdown in digital marketing spend could impact earnings.
- Cloud Competition: While Google Cloud is growing rapidly, it faces intense competition from AWS and Azure.
Despite these risks, Alphabet’s diversified business model and strong cash reserves provide a solid buffer.
Why Alphabet (GOOGL) is Ideal for My £10-a-Week Investment Challenge
Including Alphabet in my £10-a-week investment challenge for growth stocks aligns with my goal of building a diversified portfolio with long-term growth potential. Alphabet’s dominance in search, expanding cloud presence, and strategic investments in AI make it a compelling choice for investors.
With a reasonable valuation, strong earnings growth, and exciting developments like BNPL integration, Alphabet is well-positioned for continued success. Adding GOOGL to my portfolio reflects confidence in its ability to thrive in the ever-evolving tech landscape.
Final Thoughts: Is Alphabet (GOOGL) a Stock to Buy Now?
Considering its recent earnings strength, promising AI developments, and strategic BNPL push, Alphabet appears well-equipped to deliver substantial returns in the coming years. While no stock is without risks, Alphabet’s market leadership and innovation-driven approach make it a compelling addition to my investment challenge.
For those seeking exposure to tech giants with significant growth potential, Alphabet Inc. could be a smart buy — especially for investors with a long-term mindset.
Stay tuned for next week’s pick as I continue building my £10-a-week investment portfolio!
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