Dan Victor, The Motley Fool
5 min read
In This Article:
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Strong demand for Alphabet's AI-powered products is a tailwind for long-term growth.
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Its diversified ecosystem includes Google Search, YouTube, and AI cloud solutions.
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The tech giant makes an excellent choice for investors with a long-term horizon.
For nearly three decades, Google's parent Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has shaped the communications revolution. From leading online search to innovating mobile apps, Alphabet has continued its legacy of innovation into the age of artificial intelligence (AI).
The stock has delivered an impressive 145% return over the past five years; yet, further growth and earnings momentum could still make it a smart bet for investors. Here are 10 reasons Alphabet stock is a great addition to your portfolio today.
AI is reshaping the economy, boosting productivity and creativity. Alphabet is uniquely positioned to capitalize on the demand, leveraging vast amounts of user data across its diverse platforms to develop cutting-edge AI models such as Gemini.
Alphabet's AI capabilities enhance the user experience while driving efficiency in its core advertising algorithms. Significant investments in AI infrastructure, including custom chips, should ensure Alphabet stays at the forefront of a major growth opportunity.
Alphabet's AI prowess is evident in the company's flagship Google Search service, which commands over 90% of the global search market. Its AI-driven features are improving ad targeting and conversion performance.
In the first quarter, Alphabet posted net revenue growth of 12% on a year-over-year basis, with Google Search increasing 10%. This tailwind has propelled profitability. Earnings per share (EPS) of $2.81 soared 49% compared to the prior-year quarter, suggesting the business is as relevant as ever.
Another cornerstone of Alphabet's business is YouTube. The video streaming platform now counts 2.7 billion monthly active users, having evolved into a broader social media ecosystem. The company has seen significant traction in subscription services such as YouTube Premium and YouTube TV, diversifying revenue beyond ads. Alphabet's internet video dominance provides a competitive edge within the tech space.
Fueled by the data-intensive requirements of AI, Google Cloud has also been a key growth driver for Alphabet, capturing market share from competitors like Amazon Web Services (AWS) and Microsoft Azure. Demand for Alphabet's cloud computing enterprise solutions, including AI-driven tools and robust data analytics platforms, drove annual segment revenue growth of 28% in the first quarter.
