👉 A Full Analysis of Alphabet (GOOGL)

Together with XFunds 

Happy Thursday.

Welcome to this month’s stock deep-dive. Today, we’re breaking down one of the most wonderful companies in the entire world — which is only up +2% YTD.

Let’s dive into everything you need to know about Google.

As a reminder, this specific deep-dive is written by the GRIT team and is not the exclusive work of Head Analyst Austin Hankwitz.

Stock Deep Dive: Alphabet Inc. (GOOGL-US, $2.3T MCAP)

It is time to talk about this.

We usually shy away from the over-covered megacap companies in order to bring to light emerging companies that are hidden gems.

But sometimes these gems are hidden in plain sight.

Everyone has declared search dead, as we move towards answer-engines and away from search engines. Why would you need 10 blue links when you can just prompt ChatGPT and get the answer in one shot?

While this concern is absolutely valid, there are also other parts of this megacap company that are becoming wildly unappreciated and largely misunderstood.

Let’s break down this monster.

• Why now? 👉 Still Cheap! Massive Multiple Compression Overdone

• Overview 👉 What Does Google Do?

• AI Wave 👉 Google’s Place in the Coming Disruption

• Business Units 👉 YouTube, Search, Productivity, Cloud, Waymo

• How Do They Make Money? 👉 Segment Revenue Breakdown

• By The Numbers 👉 Key Metrics

• Risks 👉 Potential Pitfalls

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Why now? 👉 Still Cheap! Massive Multiple Compression Overdone

Despite its recent rally, Alphabet (Google) is trading at roughly 19x forward earnings, well below the 25–35x commanded by Meta or Microsoft.

Among trillion-dollar tech firms, Google is the clear outlier in terms of a modest multiple. Why the discount? The main culprits are regulatory overhang and AI anxiety. Ongoing antitrust lawsuits threaten to constrain Google’s dominance (a U.S. trial over its search engine deals is underway), and earlier this year fears spiked that OpenAI’s ChatGPT or other AI chatbots could eat into Google’s search empire.

These concerns weighed on sentiment and kept Google’s share price in check. However, Wall Street may be overlooking Google’s strengths. The company is proving it can adapt and even thrive in the AI era as it rolls out new AI-powered features in search and launches its most advanced AI model (Gemini 2.5). Google’s balance sheet and cash flows remain a fortress, giving it the firepower to invest heavily in future growth (e.g. $85 billion planned for AI infrastructure this year alone).

Google’s moment may be arriving: a dominant franchise undergoing an AI renaissance, still priced like an underdog. For a patient investor, the current valuation gap relative to other megacaps could signal an attractive entry point, and I believe Google will close that gap by executing on its ambitious roadmap.

Overview 👉 What Does Google Do?

Google is virtually synonymous with the internet: its search engine handles over 13 billion queries a day from 5 billion users, commanding ~90% global share. Around this core, Google runs an ecosystem that underpins digital life with YouTube (2.5 billion monthly users), Android (3 billion devices), Chrome, Gmail, Maps, and the Play Store. Most services are free, driving engagement that fuels Google’s real business: advertising. Advertisers bid in real-time to place highly targeted ads against search terms and YouTube videos, producing a cash-rich, data-driven auction model that dominates global online ads.

Beyond ads, Alphabet has diversified. Google Cloud and Workspace challenge AWS and Azure, while “Other Bets” such as Waymo (self-driving), Verily (life sciences), and GV (venture capital) aim to seed future growth. By late 2024, Google counted 270 million paid subscribers across YouTube Premium, Google One, etc.. adding recurring revenue to its ad engine. With unmatched reach and a deeply embedded user base, Google functions less as a single company than as critical infrastructure for the internet economy.

AI Wave 👉 Google’s Place in the Coming Disruption

Google has long been central to AI, pioneering the Transformer architecture and headline advances like AlphaGo and AlphaFold. The public spotlight shifted after ChatGPT’s late-2022 debut, prompting fears for Google Search. Instead, Google embedded AI directly into Search. Now, “AI Overviews” serves 1.5 billion users in 140 countries, and ad monetization matches classic search. CEO Sundar Pichai says the feature even boosts engagement on complex queries.

This reflects Google’s “full-stack” AI play. Its Gemini 2.5 family (Pro, Flash, etc.) rivals GPT-4 and now powers Search, Android, YouTube, Gmail, Docs, and more, each with >500 million users. Controlling the models, apps, and custom TPU chips gives Google rare vertical integration.

Enterprise AI is the second pillar. Google Cloud, first to offer Nvidia’s newest chips and its own TPUs, grew revenue 32% YoY in Q2 2025 as demand exceeded capacity, triggering a $85 billion data-center build-out. Bard for consumers and Gemini services for businesses position Google as the go-to AI partner across both fronts.

Competition is fierce with Microsoft/OpenAI, Amazon, Meta, and a myriad of startups, but Google’s trove of search queries, YouTube views, and Android devices feeds superior training data. The company can deploy innovations instantly to billions while monetizing them through ads and cloud contracts. By investing at unprecedented scale and iterating rapidly, Google aims not merely to defend its turf but to dictate the pace of AI, reinforcing its ad engine and opening fresh growth in cloud AI services.

Business Units 👉 Search, YouTube, Productivity/Cloud, Waymo

Search & Advertising
Google processes over five billion queries a day and holds about 90% of global search share, powered by default‑search deals, superior algorithms, and a vast web index. The model is simple: keyword auctions match user intent with text or shopping ads, producing industry‑leading margins. Including display and YouTube, ads supplied roughly three‑quarters of Alphabet revenue in early 2025, with Google‑owned properties alone topping $230B in 2024 ad sales. Continuous AI‑driven relevance, vast data sets, and a 150‑language footprint make Search the cash engine that funds Alphabet’s wider ambitions.

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