Alphabet Shares Jump on Favorable Antitrust Ruling. Can the Stock Keep Its Momentum or Is It Too Late to Buy?

Key Points

• Alphabet got a favorable ruling in the remedies part of its antitrust trial.

• The company's big distribution advantages were basically preserved.

• Even after the rally, the stock still looks attractively valued.

• 10 stocks we like better than Alphabet ›

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) investors breathed a sigh of relief as one of the biggest potential risks involving the stock was removed. U.S. District Judge Amit Mehta finally handed down remedies in the Department of Justice's antitrust victory against the company's search business, but the outcome was far from punitive.

The ruling said Google could hang on to its Chrome browser, which regulators had asked the judge to force Alphabet to sell. That would have been one of the worst-case scenarios. Instead, the company was told it could no longer lock in long-term exclusive search deals, but it is still allowed to pay for default placement. Deals now have to be renewed every year, but Alphabet can still have a revenue-sharing agreement in place with Apple.

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Mehta also made Google share some data with rivals, but he didn't try to break apart the company. The judge took into careful consideration what impact artificial intelligence (AI) may have on the future of search.

Alphabet's stock popped following the ruling, and is now up about 20% on the year. The question now is whether the stock is still a buy.

Google's advantages are maintained

The judge's ruling not only took away the worst-case scenario, it also helped preserve Google's biggest advantage: distribution. Owning Chrome and Android gives Alphabet a huge advantage when it comes to search.

Chrome is the world's No. 1 browser with a nearly 70% market share, while its Android smartphone operating system has a more than 70% market share. Google search is the default search engine on both of these key gateways to the internet. Meanwhile, the ruling also basically let it keep the heart of its search deal with Apple in place. Add it all up and Google remains the default option for most people around the globe. Meanwhile, people tend to stick with defaults, and Google search still has the most reach and best monetization for both itself and partners like Apple.

With that distribution foundation intact, Alphabet can now continue layering AI into search. Its AI Overviews have already become a hit with users, with more than 2 billion people using them monthly, helping drive search query growth last quarter. Meanwhile, the company launched what it calls AI Mode, which turns search into something closer to an AI chatbot. The beauty, though, is that users can toggle between traditional search and AI Mode without having to leave their browser or change apps. With its Gemini large language model (LLM) now considered one of the best AI models out there, that's a big edge.

Alphabet has also been leaning into commerce when it comes to AI. AI by itself is great for users, but companies need to be able to monetize it. With new features like "Shop with AI," Google users can now describe what they are looking to buy and even virtually try on clothes.

Meanwhile, being able to monetize its users is also one of Alphabet's key advantages. The company spent decades building one of the most comprehensive two-sided ad networks on the planet, and its ability to serve everything from global brands to local businesses is unparalleled. While start-ups like OpenAI and Perplexity are still trying to figure out their business models, Alphabet already has the ad network in place ready to monetize AI.

Image source: Getty Images.

More than search

It's also a mistake to think of Alphabet as only a search company. YouTube remains the dominant online video platform, and advertisers continue to shift dollars there from TV. Its cloud computing unit, Google Cloud has been a huge growth driver. Both revenue and profitability at the segment are soaring, as customers flock to build and deploy AI models on its infrastructure. Meanwhile, its custom Tensor Processing Units (TPUs) give it nice cost and performance advantage over competitors that are only using expensive off-the-shelf graphics processing units (GPUs) from Nvidia.

Alphabet also has some attractive emerging opportunities. Waymo is rapidly expanding its robotaxi service to new cities, which could become a huge business over the next decade. It's also an important player in quantum computing with its Willow chip.

Is it too late to buy the stock?

Even after its nice rally, Alphabet's stock is not expensive. The stock trades at a forward price-to-earnings (P/E) ratio of around 21 times 2026 analyst estimates. Compared to other AI megacap peers, that's a bargain.

So, is it too late to buy the stock after the bounce? I don't think so. The biggest risk to Alphabet is now off the table, and the company gets to keep all its biggest advantages. Meanwhile, Alphabet has been showing that not only is AI not disrupting its search business, but it's been helping drive growth. Throw in Google Cloud and Waymo, and you have multiple growth drivers for a business that already generates huge free cash flow.

The pop in the stock looks more like the start of a rally, not the end of one.

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Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy.