A surprise candidate has come from behind and turned into the top-performing "Magnificent Seven" stock of 2025. The company's name is Alphabet (GOOG 1.45%) (GOOGL 1.45%). Owner of Google and various other technology platforms, Alphabet's stock was a laggard versus the likes of Microsoft earlier this year, but has come roaring back to produce a total return of 57% so far in 2025.
The stock once again has one of the largest market caps in the world, and now trades at a much higher price-to-earnings ratio (P/E). Does that mean it is too late to buy Alphabet stock for your portfolio? The answer may surprise you.
NASDAQ: GOOG
Key Data Points
Steady market share gains in AI usage
First, we need to take a look at Alphabet's position within the artificial intelligence (AI) space. Current earnings for the business may be derived from Google Search, but future revenue will come from its Gemini AI model being deployed across its namesake app, Google Search, YouTube, and Google Cloud (among other Alphabet products).
Image source: Getty Images.
Gemini began its growth much more slowly than the disruptive chatbots ChatGPT and Claude, both heavily funded AI start-ups. However, 2025 has been the year of market share gains for Gemini, which came from close to no usage to a 13% share of the AI market. It is still well behind ChatGPT, but growing quickly, and with a huge distribution advantage with the billions of users of Google products, it can be easily marketed.
Alphabet also has a cost advantage due to using its own data center infrastructure and computer chips to run Gemini, making it more profitable than both OpenAI (owner of ChatGPT) and Anthropic (owner of Claude), which are burning a boatload of cash right now.
Even though Alphabet is spending close to $25 billion a quarter on capital expenditures, it is still generating positive free cash flow and self-funding its AI expansion. No direct competitor can say the same.
Long-term earnings power growth
AI should be a steady growth driver for Alphabet, especially if Gemini can keep gaining market share.
That is not the entire Alphabet business. Well, a lot of the business is now utilizing Gemini's AI capabilities, but it is far from the only moneymaking product under its umbrella. For example, there is YouTube, with over $10 billion in quarterly advertising revenue. Or there's Google Cloud, which is growing 34% year over year at over $15 billion in quarterly revenue. Not to forget Google Search, the main profit driver (still) for Alphabet, with $50 billion in quarterly sales.
The list could go on. We even have self-driving division Waymo that is scaling up rapidly in cities around the country.
Alphabet's revenue is growing by 15% year over year right now, even at such an immense scale. With so many growth engines over the next five years, this megacap company should be able to keep compounding its revenue higher for a long while.
GOOG PE Ratio data by YCharts
Is Alphabet stock still a buy?
Alphabet's earnings power certainly did not grow as fast as its stock price in 2025. The stock now has a price-to-earnings ratio (P/E) of 30 compared to close to 15 earlier this year. That puts high expectations on the business going forward.
Even with this high P/E ratio, I still think Alphabet will do well for investors who buy today and hold for many years. As mentioned, sales are growing quickly, but earnings per share (EPS) are growing even faster with margin expansion and steady share repurchases. A fast-growing EPS will bring down Alphabet's P/E ratio quickly and deliver strong stock returns over the next decade.
