Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) is a monster business that currently sports a market cap of $3.4 trillion. On its path to becoming one of the world's most dominant companies, Alphabet has taken care of its investors. In the past decade, shares have climbed 653% (as of Nov. 14).
While forward returns will likely come down, this "Magnificent Seven" stock will soar over the next 10 years. Here's one reason why.
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Alphabet continues to post double-digit earnings growth
Over long periods of time, what drives stock prices is a company's earnings growth. Businesses that are able to increase their profits can generally see their values rise. Alphabet has done a great job in this regard in the past, and it's set to continue in the future.
According to Wall Street consensus analyst estimates, the company's earnings per share are expected to grow at a compound annual rate of 16.7% between 2024 and 2027. It wouldn't be a surprise for the double-digit gains to keep up after this forecast period.
Google Cloud is a major growth engine
During the third quarter (ended Sept. 30), Alphabet generated 73% of its total sales base from advertising. This will remain a key part of the business.
However, Google Cloud is quickly ascending, posting year-over-year revenue and operating income growth of 33% and 89%, respectively, in Q3. This booming segment, propelled by demand for artificial intelligence (AI) tools, is seeing its profitability keep improving. This should help drive Alphabet's stock price over the next decade.
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Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.