Alphabet's AI-Driven Growth Strategy Positions It for Strong 2025

Alphabet Drives Into 2025: Google's AI, Waymo Lead The Charge - Alphabet (NASDAQ:GOOGL)

Alphabet's innovation in AI and Waymo expansion strengthens its 2025 growth outlook. Alphabet Inc's GOOGL GOOG innovation machine is revving up for 2025, and Wall Street has its eyes firmly set on the tech titan. JPMorgan analyst Doug Anmuth is bullish on Alphabet's Google, citing a flurry of advancements in generative AI, technical infrastructure, and autonomous driving as key growth drivers for the year ahead. "Google's accelerated pace of innovation is very evident into the new year with many significant recent product announcements," says Anmuth, who reiterates his Overweight rating and sets a shared price target of $232 for both GOOG and GOOGL shares by December 2025 -- increase of almost 20%. Generative AI: Gemini 2.0 Steals The Show Anmuth points to Google's leadership in AI as a cornerstone of its growth outlook. The recent rollout of Gemini 2.0, the company's latest large language model (LLM), exemplifies Google's innovation. "Gemini 2.0 and its associated applications like NotebookLM and Jules showcase the company's ability to redefine the AI landscape," he notes. Beyond LLMs, Google's infrastructure upgrades, including its sixth-generation TPU Trillium, are poised to strengthen its competitive advantage. The Willow quantum chip, launched in December, reflects Google's long-term vision. While its real-world impact may take time, Anmuth underscores its strategic importance: "Willow shows that Google is at the forefront of tech innovation and bolsters its long-term positioning." Waymo: Shifting Gears Globally Waymo, Alphabet's autonomous driving unit, is preparing to debut in Japan, marking its first international expansion. Collaborating with Nihon Kotsu and GO, Waymo plans to roll out in Tokyo by early 2025. "Waymo's partnership strategy in Tokyo highlights its ability to adapt commercialization approaches for different markets," Anmuth observes. Safety remains a key differentiator for Waymo, as demonstrated by a recent Swiss Re study comparing Waymo's safety record to human drivers. "This is critical in increasing adoption of autonomous vehicles," says Anmuth, emphasizing the division's edge over competitors like GM's Cruise, which recently scaled back its robotaxi operations. Read Also: Waymo Robotaxi Circles Phoenix Airport Parking Lot, Passengers Get A Bonus Tour They Didn't Ask For Android XR: A Leap Into Extended Reality Google is also stepping into the extended reality (XR) space with Android XR, a platform for VR/AR devices. Partnering with Samsung, the company is creating an ecosystem for the next generation of computing. "We believe Android XR strengthens Google's competitive advantage by offering a new access point for Gemini-powered applications," Anmuth explains. Regulatory Clouds Clearing? On the regulatory front, Google's remedies proposal in the DOJ search distribution trial suggests a pragmatic approach. "The proposal is narrower in scope and duration, signaling a potential for a more favorable resolution," says Anmuth. The analyst also notes that a change in administration could further improve the regulatory environment, easing concerns for investors. Valuation Remains Compelling Trading at approximately 18.5x estimated 2026 earnings, Alphabet's valuation is still attractive, especially compared to other mega-caps. Anmuth highlights additional tailwinds, including potential buyback increases and operational efficiencies under CFO Anat Ashkenazi. "We project an 80-basis-point GAAP operating margin expansion in 2025, reaching 33%," he adds. For investors, the story is clear: Google's focus on innovation across AI, infrastructure, and other areas highlights its drive to lead the industry. Read Next: The Death Of Net Neutrality: Winners, Losers, What It Means For Future Of The Internet Photo: Shutterstock GOOGLAlphabet Inc$196.402.40%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewGOOGAlphabet Inc$197.752.39%Market News and Data brought to you by Benzinga APIs

Why Alphabet's "Challenging" 2025 May Benefit the Stock as It Pushes AI Innovation | The Motley Fool

Alphabet (GOOGL -1.01%) (GOOG -1.17%) made headlines toward the end of 2024, with its CEO telling its employees to be ready for an important 2025 while also warning that it would be a challenging year. While it may be a challenging year for the company, this could be the setup for a strong year for its stock. Let's take a look at what CEO Sundar Pichai had to say about 2025 based on a report from CNBC and why his comments could be good for the stock. At its headquarters in Mountain View, California, Pichai laid out why 2025 will be a critical year for Alphabet as he addressed employees. He noted that the stakes were high with artificial intelligence (AI) and that the company as a whole needed to move faster. He called this a disruptive moment and said that Alphabet needed to be able to use AI to help solve real-world problems. At the same time, Pichai acknowledged the regulatory pressure the company was under. In 2024, Alphabet lost an antitrust case brought on by the U.S. Department of Justice (DOJ), which ruled that it had a search monopoly. As a remedy, the DOJ has asked the court to force the company to divest its Chrome browser and even potentially its Android phone operating system, as well as share user and advertiser data. Meanwhile, the DOJ just concluded another case against the company for dominating online ad technology, and the U.K. has also announced its objections over Alphabet's ad technology practices. Pichai, however, said that this comes with the territory, given the company's size, and that it must not get distracted. The company's focus for 2025 will clearly be on AI. The CEO displayed a chart showing how its Gemini 1.5 large language model (LLM) is currently in the lead versus competitors, including ChatGPT, while also predicting that there will be a lot of back-and-forth between which models are the best. One area where Alphabet appears to have taken a clear lead is in video AI. The company's Veo 2 AI video generator has received rave reviews and is widely considered to greatly outperform OpenAI's Sora video generator, which came out just a few weeks before Veo 2. Veo 2 was trained using Alphabet's YouTube video platform, which could account for its advantages. Gemini 2.0, Alphabet's newest generation AI LLM, meanwhile, will be incorporated throughout the company's products in 2025. Alphabet is also looking to push its Gemini app, which is not currently as popular as ChatGPT. The company has seen some strong momentum in the past few months, but it is playing catch-up, as ChatGPT has become synonymous with AI after bursting onto the scene a few years ago. Pichai said, "Scaling Gemini on the consumer side will be our biggest focus next year." Alphabet has sometimes been viewed as bloated and living off its laurels. However, the competitive threat and opportunity with AI have appeared to reinvigorate the company and its innovative juices. Pichai said several times that the company needed to be "scrappy." While competition can be viewed as a bad thing, sometimes it is needed to make a company start picking up its game. Alphabet appears to be doing just that. This can be seen in its recent breakthrough in quantum computing, as well as with Veo 2. Right now, competition is bringing the best out of the company. And while Veo 2 is superior due to being trained on YouTube, I could see Google's decades of search data being a key differentiator in any future AI search battles. Meanwhile, I think AI Search Overviews and the Gemini App should eventually lead to new forms of ad monetization. Currently, Google only monetizes about 20% of its searches, so new AI queries could be a big revenue growth driver at some point in the future. From a valuation standpoint, Alphabet is one of the cheaper mega-cap tech stocks involved in AI, trading at a forward price-to-earnings multiple of about 21.5 based on 2025 estimates. With Alphabet looking focused and ready for the challenges of 2025, I'd be a buyer of the stock at current levels. The company is showing its innovation prowess, which I think should help endear the stock to investors. At the same time, I find its valuation very attractive with it having a lot of room for expansion of its P/E multiple.

Is Alphabet a Top Stock to Buy for 2025? | The Motley Fool

Alphabet (GOOG -1.17%) (GOOGL -1.01%) had a solid 2024, with the stock up over 40% as of the time of writing. With that kind of performance, it would be understandable if investors thought it couldn't have a great 2025. However, I don't think that's the case. This tech giant has several strong tailwinds, and those winds aren't set to subside anytime soon (and certainly not in 2025). Furthermore, the stock is attractively priced, making Alphabet a great stock to consider heading into the new year. Alphabet does many things, but its primary business is still advertising through the Google search engine. In the third quarter, 56% of revenue came from the Google Search division, and that segment experienced 12% year-over-year revenue growth. Considering how mature this business segment is, that's highly respectable growth. Having a rock-solid base segment like the search business allows Alphabet to invest its massive cash flows into other areas of its business. One area that has received a lot of attention lately is artificial intelligence (AI), especially generative AI. Alphabet has one of the top models in the space: Google Gemini. Gemini usage has rapidly increased. Management states that its enterprise AI platform, Vertex, has seen Gemini usage increase 14 times in a six-month period. That's a massive figure and shows how Gemini is starting to become integrated into various clients' operations. Most of this usage occurs through its cloud computing division, Google Cloud. While the cloud computing industry is benefiting as a whole amid the AI arms race, the general migration from on-site computing to cloud computing is still occurring. This dual effect is causing Google Cloud's revenue to rise rapidly, as revenue increased by 35% in Q3. That's far quicker than the 29% and 28% growth it experienced in Q2 and Q1, respectively. Overall, Alphabet's business is doing great and is poised for another strong 2025, as Wall Street analysts project 12% revenue and earnings growth. While that's not flashy growth like some of its big tech peers are putting up, it's enough to surpass the broader market's long-term growth rate. But there could be another catalyst that spurs Alphabet's stock higher in 2025. Alphabet's valuation is best compared to its big tech siblings, which are often grouped into the "Magnificent Seven." Alphabet is the cheapest stock in terms of both the trailing price-to-earnings (P/E) ratio and the forward P/E ratio. In fact, Alphabet doesn't hold much of a premium to the broader market, either. The S&P 500 trades for 25.2 times trailing earnings and 21.9 times forward earnings. So, compared to the broader market, Alphabet holds a reasonable price tag. With all of these factors in mind, I think Alphabet is a stock that can beat the market next year; just don't expect it to blow Wall Street out of the water. The growth trends Alphabet is experiencing in the AI realm aren't going to subside anytime soon, and it will be a key investment area for many years. Although Alphabet had a solid 2024, I think 2025 will be another successful year for its investors.