Alphabet, the corporate group of Google, appeared as the winner of the Magnificent Seven in 2025, crushing the 37% gain in Nvidia with a rallying 63%.
The valuation of the company was $313.47 per share or more than by far that of its peers, and its market capitalization of $3.8 trillion, well above the levels of its competitors, was undergoing volatility as was the rest of the Big Tech industry.
Misery prepares the way to success
The Magnificent Seven, which includes Alphabet, Amazon, Apple, Microsoft, Meta, Nvidia, and Tesla, experienced headwinds at the beginning of the year and only three companies have passed the S&P 500 bar.
Alphabet was initially performing poorly but it later reshaped its course. AI-assisted search and advertising led to high Q3 revenues of $102.3 billion, up 16% year over year (YoY), versus the $99.9 billion consensus.
Google Services revenue was $87.1 billion (+14% YoY), with Google Search & other at $56.6 billion (+15% YoY), YouTube ads at $10.3 billion (+15% YoY), Network at $7.4 billion (-2.6% YoY), and Subscriptions, platforms, and devices at $12.9 billion (+21% YoY). ,
“Alphabet had a terrific quarter, with double-digit growth across every major part of our business. We delivered our first-ever $100 billion quarter,”
Sundar Pichai, CEO of Alphabet, said:
“Our full-stack approach to AI is delivering strong momentum. The Gemini App now has over 650 million monthly active users. Google Cloud accelerated, ending the quarter with $155 billion in backlog.”
Valuation Benefit and Future Perspective
With a forward price/earnings ratio of 24.94, Alphabet is trading at a discounted valuation compared to the price/earnings ratio of Nvidia, which supports the value proposition of the company.
The regulatory complications and capital expenditures could be a problem, however, the increasing cloud margins to 17% are an indication of increasing profitability.
For CapEx, Ashkenazi stated,
“We now expect CapEx to be in the range of $91 billion to $93 billion in 2025, up from our previous estimate of $85 billion. Looking out to 2026, we expect a significant increase in CapEx, and we’ll provide more detail on our fourth quarter earnings call.”
A new benchmark was set in the third quarter of 2025 when Alphabet’s quarterly revenue surpassed $100 billion for the first time.
This record level now forms the baseline for its 2026 progression.
Key financial metrics and projections include:
- Projected 2026 Revenue: $455 billion, representing growth of roughly 14% from an estimated $400 billion in 2025.
- Projected 2026 EPS: $11.24, indicating about 6% growth from $10.63 in 2025.
- Valuation: Shares trade at a trailing P/E of approximately 31 and a forward P/E of around 28.
- 52-Week Range: $140.53 to $328.83.
Based on this, the thesis of this investment is that Alphabet has both the potential to significantly outperform the general market over the 2030s and at the same time will experience stability along with a substantial upward movement.
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