The introduction of ChatGPT appears to have dramatically changed perceptions regarding Google's parent company, Alphabet (GOOGL 1.60%) (GOOG 1.51%). Thanks to the dominance of Google Search, Alphabet had become a digital-advertising powerhouse. However, as more users turned to ChatGPT, Google Search's market share fell below 90%, leading to questions about the company's future.
Upon closer inspection, investors have good reason to continue to believe in Alphabet stock, regardless of its competitive position with regard to ChatGPT. Here's why Alphabet could experience considerable growth over the next five years.
Image source: Alphabet, Inc.
Alphabet's evolution
Alphabet has long relied on digital advertising for the majority of its revenue. Although the company has gradually diversified, advertising still accounted for 74% of the company's revenue in the first half of the year.
The concerns about its revenue model are valid. Alphabet derives revenue by driving traffic to websites displayed through its search engine and other avenues, such as its YouTube streaming service.
ChatGPT provides information to users without directing them to a website, which could potentially deprive ChatGPT of the ability to generate revenue. Additionally, since Google Search utilizes ChatGPT peer Google Gemini to accomplish the same task, Google Search could potentially drive less revenue, as searches would lead users to advertised websites less often.
Nonetheless, with a nearly 90% market share, Google Search has remained remarkably sticky. Also, YouTube, with an ad-driven model that remains solid, has become one of the most popular streaming channels. That may pose a competitive threat to streaming giants like Netflix.
Alphabet has long sought to diversify its revenue sources and, to that end, it owns numerous non-ad businesses. The most prominent of those is Google Cloud, which made up 14% of the company's revenue in the first half of 2025, up from 12% in the same year-ago period.
Investors should also take note of Waymo, despite it not appearing in Alphabet's financials. A fundraising round recently valued Waymo at $45 billion, and partnerships with Uber and automakers such as Toyota and Hyundai have made it increasingly essential to the automotive industry.
As Waymo and other Alphabet-owned industries become larger revenue drivers, it should reduce the company's dependence on ad revenue. That should mitigate the damage that ChatGPT could do to its business model.
Alphabet by the numbers
Alphabet's financial position suggests that concerns about the state of its business model haven't stopped the company's growth. In the first half of 2025, it generated $187 billion in revenue, a 13% rise from the first two quarters of 2024. Costs and expenses grew more slowly, and gains from interest and equity securities resulted in $63 billion in net income during the year's first half, a 33% yearly increase.
Despite pledging to spend $75 billion in capital expenditures (capex) in 2025, the company continues to hold $95 billion in liquidity, giving it one of the strongest balance sheets in the market. Furthermore, Alphabet generated almost $67 billion in free cash flow over the previous 12 months, a figure that excludes capex. That gives the Google parent tremendous optionality, allowing it to invest in its business or return cash to shareholders in the form of dividends or share repurchases.
Amid concerns about the company, the stock underperformed the S&P 500 over the last year. Still, the stock has risen by more than 30% from its April lows.
The stock's price-to-earnings ratio (P/E) stands at 21. That not only makes it the lowest-cost stock in the "Magnificent Seven" but also makes it remarkably inexpensive, considering its continued growth.
Alphabet is an underrated stock
Alphabet's low valuation and business model could position it for significant growth between now and 2030. One can find reasons to doubt the company's business model if Google Search leads fewer users to sites, but with 74% of revenue still coming from digital ads, the growth trajectory of that business remains in question.
Nonetheless, Alphabet's massive liquidity and free cash flow give it a tremendous ability to foster other businesses while rewarding shareholders. As Google Cloud, Waymo, and other enterprises contribute a larger share of the company's revenue, Alphabet is likely to prosper over the next five years, and a low P/E ratio suggests an underappreciated opportunity.
