Alphabet Earnings Beat: An Undervalued Tech Behemoth

Alphabet (GOOGL) remains one of the most compelling investment opportunities in large-cap tech today. With regulatory scrutiny and investor skepticism weighing on sentiment, contrasted by the opportunities in Waymo and Google Cloud, the disconnect between perception and performance has created a rare window of opportunity for long-term investors.

Alphabet reported extremely robust Q1 2025 earnings, with revenue rising 12% year-over-year to $90.2 billion and net income surging 46% to $34.5 billion ($2.81 per share), beating analyst expectations. Growth was driven by a 10% increase in Google Search & Other revenues to $50.7 billion and a 28% rise in Google Cloud revenue to $12.3 billion, reflecting strong demand for AI-driven services. The long-predicted death of Google search has again been postponed.

CEO Sundar Pichai highlighted the successful rollout of Gemini 2.5, Google's most advanced AI model, and noted that AI Overviews now serve 1.5 billion users monthly. Alphabet announced a 5% dividend increase to $0.21 per share and authorized a $70 billion share repurchase program. Capital expenditures reached $17.2 billion in Q1, part of a planned $75 billion investment in AI infrastructure for the year.

GOOGL Stock Is the Best Bargain in the Magnificent 7

Alphabet shares currently trade at just 18.3x forward earnings, which is well below both the S&P 500 average and the company’s own 10-year median of 25.8x. Among the Magnificent 7, it is the only stock trading under 20x forward earnings, making it a clear outlier in terms of valuation.

This disconnect between performance and valuation suggests the market may be overly focused on competitive risks, while overlooking Alphabet’s continued dominance in search and the exceptional long-term potential of its autonomous driving unit, Waymo. Waymo is currently live in a partnership with Uber Technologies (UBER), and running several hundred thousand rides per week across four US cities.

GOOGL Stock Presents Compelling Technical Pattern

Looking at the price action, there’s evidence that Alphabet stock may have put in a long-term bottom this month. On the chart, we can see that price tested the 2021 highs twice—first in July 2024, and again this April. Both times, the stock reversed sharply from that level, suggesting strong buying interest and support at those prior highs.

This month’s price bar has also formed a significant bullish reversal pattern, often referred to as a pin bar or hammer candle, which are both classic signs of potential bottoming behavior. Based on this setup, I believe investors can consider owning GOOGL at current levels, using this month’s lows and the former 2021 highs as key risk levels to manage the trade.

Should Investors Buy Shares in GOOGL?

Between its robust fundamentals, discounted valuation, and favorable technical setup, Alphabet stands out as a compelling opportunity in today’s market. Despite its continued strong performance and exciting outlook, the stock continues to trade at a steep discount. This kind of divergence between business performance and investor sentiment doesn’t last forever.

The regulatory overhang may persist in headlines, but the underlying business is proving remarkably resilient and increasingly diversified. Google Cloud continues to grow aggressively, while Waymo’s real-world rollout through Uber Technologies hints at just how far ahead Alphabet may be in the race toward autonomous mobility. Meanwhile, Alphabet’s core business, Search continues to dominate, even as critics claim its best days are behind it.

Taken together, these elements paint a clear picture: Alphabet remains one of the most dominant businesses in the world. And with the stock trading at one of the most attractive valuations in big tech, investors have a chance to own a powerful, cash-rich platform with decades of innovation ahead, and the price that suggests many investors are missing the forest from the trees. For long-term investors, that’s the kind of asymmetric setup worth paying attention to.

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This article originally published on Zacks Investment Research (zacks.com).

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