Alphabet: The Undervalued AI Giant with Consistent Profits and Growth

Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) is a leading AI company with a full-stack approach, operating in research and development, infrastructure, and consumer applications. Its Google Cloud segment is growing rapidly and has secured a six-year, $10 billion deal with Meta. Alphabet's revenue and operating income have more than doubled over the past five years, and it is the lowest-valued of the "Magnificent Seven" stocks.

Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), a leading AI company, has seen significant growth and strategic shifts following the U.S. Department of Justice's (DOJ) antitrust ruling. The DOJ's decision, which spared Alphabet from the forced divestiture of Chrome and Android, has bolstered investor confidence and underscored the company's strategic positioning in the AI and cloud sectors.

Post-DOJ Ruling and Strategic Valuation

The DOJ's ruling, announced in September 2025, avoided the breakup of Alphabet's core assets, preserving its ecosystem dominance. This decision was met with a nearly 8% surge in Alphabet's stock price, adding over $234 billion to its market capitalization [1]. The ruling also introduced data-sharing mandates aimed at curbing monopolistic practices, which analysts view as manageable constraints that do not disrupt core revenue streams [3].

AI and Cloud Momentum

Alphabet's Q2 FY 2025 earnings highlight its leadership in AI and cloud computing. Google Cloud revenue surged 32% year-over-year to $13.6 billion, with a $106 billion enterprise backlog reflecting robust demand for AI-driven tools [1]. The adoption of Google's Gemini AI platform has surged 35x, with over 85,000 enterprises now building with Gemini [2]. These developments signal Alphabet's ability to monetize AI at scale, a critical factor in unlocking long-term value.

Infrastructure Expansion

Alphabet has also been investing aggressively in infrastructure to support its AI workloads. The company raised its FY 2025 capital expenditure outlook to $85 billion, with significant investments in servers and data centers [1]. This infrastructure buildout positions Google to capitalize on the global AI arms race, where enterprises are increasingly prioritizing scalable, secure, and high-performance solutions.

Alphabet's Position Among Megacap Stocks

Despite its recent growth, Alphabet remains the lowest-valued of the "Magnificent Seven" stocks. Its forward price-to-earnings (P/E) ratio of 21 times 2026 analyst earnings estimates is significantly lower than peers like Microsoft, Apple, and Amazon, which trade at similar multiples of 30 times [1]. This valuation discrepancy suggests that Alphabet may be undervalued relative to its peers.

Conclusion

Alphabet's strategic positioning, bolstered by the DOJ's ruling and accelerating momentum in AI and cloud computing, positions it as a strong contender in the tech sector. With a forward P/E ratio of 21, Alphabet appears to be an attractive investment opportunity for those seeking exposure to AI and cloud growth. However, investors should remain mindful of ongoing compliance risks in AI and ad tech sectors.

References

[1] https://www.aol.com/prediction-underrated-ai-stock-could-161500527.html
[2] https://www.ainvest.com/news/alphabet-googl-poised-post-doj-ruling-rating-high-growth-ai-cloud-era-2509/