Is Alphabet Stock a Buy Now?

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) shares are down about 15% so far in 2025, as concerns over growing competition from large language models like OpenAI's ChatGPT and mounting regulatory scrutiny weigh on investor sentiment. With its dominance in search and advertising facing new challenges, doubts have surfaced about the company's long-term growth.

However, a closer look at Alphabet's latest earnings shows a business that may be better positioned than the headlines suggest.

Alphabet's businesses carry on despite outside concerns

As the artificial intelligence (AI) boom accelerates -- driven by large language models and chatbots -- some on Wall Street are questioning whether Alphabet's dominance in search can continue to grow. Notably, Google's global search market share recently dipped below 90% for the first time since 2015, according to web analytics tool StatCounter.

Additionally, Alphabet is defending its search business in a major antitrust case brought by the U.S. Department of Justice and several states. Regulators allege that the company illegally stifled competition by paying web browser and phone makers to set Google as the default search engine. The government is seeking to block these payments and is calling for Alphabet to spin off its Chrome browser.

While the outcome of the case remains uncertain -- and Alphabet could appeal any unfavorable ruling -- the company's underlying business continues to perform well. If regulators were to force a breakup, shareholders would likely retain ownership in any spun-off entities, either through direct stock in the new companies or equivalent value, rather than lose that portion of the business outright.

As for its financials, Alphabet recently announced its Q1 2025 earnings, with total revenue growing 12% year over year to $90.2 billion. Despite the hype around AI chatbots, advertisers are still spending heavily on Google's platforms. Notably, its "Google Search and other" segment -- the largest part of the business -- rose from $46.2 billion​ to $50.7 billion year over year. The company's free cash flow also surged 12.6% year over year in Q1 2025 to $19 billion.

GOOG Revenue (Quarterly) data by YCharts

Alphabet is spending heavily on its next growth phase

Alphabet is not ignoring the AI revolution. In fact, it is spending aggressively to stay in the game. Alphabet's capital expenditures -- the expense for technical infrastructure to support AI products and services -- jumped to $17.2 billion in Q1 2025, compared to $12 billion a year earlier.

Looking ahead, management guided for its capital expenditures spending of $75 billion in 2025, up 43% from $52.5 billion in 2024. On its most recent earnings call, Alphabet CFO Anat Ashkenazi underscored why the company is doubling down on AI spending: "We do see a tremendous opportunity ahead of us across the organization, whether it's to support Google Services, Google Cloud, and Google DeepMind."

GOOG Capital Expenditures (Quarterly) data by YCharts

Beyond building in-house capabilities, Alphabet also owns a reported 14% stake in Anthropic, one of the hottest large language model start-ups, giving the tech giant exposure to cutting-edge AI innovation outside of its own plans.

Alphabet is also planting seeds outside of search and ads. Its autonomous driving unit, Waymo, continues expanding operations, serving over 250,000 passengers per week, which is up five times from a year ago, according to management. While Waymo, which is included in Alphabet's "other bets" segment, operates at a loss of approximately $1 billion each quarter, it demonstrates management's willingness to take risks to diversify its revenue streams.

Management gives back to its shareholders

Generally, there are two ways management teams return capital to shareholders: dividends and share repurchases. First, after initiating its first-ever dividend a year ago, Alphabet's management recently announced its first-ever dividend hike. The company will now pay a quarterly dividend of $0.21 per share, equating to an annual yield of 0.5%. While modest, one promising stat is the company's ultra-low payout ratio of just 8.8%. That means Alphabet is distributing only a small fraction of its earnings, leaving significant room for future dividend growth without straining its balance sheet.

In addition to dividends, Alphabet has been aggressively repurchasing its stock, cutting its share count by 11% over the past five years. These buybacks effectively boost each remaining shareholder's ownership without requiring further investment. Most recently, the board approved a new $70 billion authorization, raising total repurchase capacity to $99.5 billion as of March 31, 2025, which signals that management remains committed to sustaining buybacks and continuing to enhance long-term value for shareholders.

GOOG Shares Outstanding data by YCharts

Valuation looks compelling

At the time of this writing, Alphabet trades at 26.8 times free cash flow, below its five-year average multiple of 29.2. That discount comes despite the company continuing to grow meaningfully, reinvesting aggressively in AI, and steadily returning capital to shareholders through dividends and share repurchases.

When combined with $83.4 billion in net cash on its balance sheet, these factors give Alphabet the flexibility to navigate any short-term uncertainty, making it a compelling buy for long-term investors.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Collin Brantmeyer has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.