Both Alphabet (GOOG 1.68%) (GOOGL 1.66%) and Meta Platforms (META 2.52%) sit near the center of two big investor debates: how quickly AI (artificial intelligence) spending is rising and which platforms can turn that spending into durable, profitable growth.
But which of these two stocks is a better buy today? This is a timely question, as social media specialist Meta is scheduled to report fourth-quarter results later this month, and online search giant Alphabet is scheduled to report its results in early February. Of course, there's no way to know how either stock will move when they report earnings, but it helps to have a good grasp on the businesses and their valuations headed into their reports.
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Ultimately, I believe the choice between the two comes down to whether Meta's lower valuation fully compensates investors for some of its disadvantages relative to Alphabet -- namely, its less diversified business.
Alphabet: The more diversified business
Alphabet grew revenue 16% year over year in the third quarter of 2025 to $102.3 billion. Of course, the primary driver for Alphabet's overall top line remains its core ad-supported Google services, where search and YouTube ads each delivered double-digit growth in Q3.
NASDAQ: GOOG
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But what's powerful about Alphabet's business is that it boasts an important and fast-growing non-advertising component: Google Cloud. Alphabet's cloud computing revenue rose 34% year over year to about $15.2 billion in the quarter. This outpaced Google services growth of 14% year over year. Of course, Google services revenue for the quarter of $87.1 billion still towered over its Google Cloud business. But Google Cloud is now big enough to be a major part of the investment thesis. Of course, with this growth comes spending. In its third-quarter update, management raised its 2025 capital expenditures outlook to a range of $91 billion to $93 billion.
With such a robust business, Alphabet commands a premium valuation. Shares trade at a price-to-earnings ratio of 32 -- well over Meta's multiple of 27.
Meta: The faster-growing business
Meta's latest quarter shows a simpler business model (almost entirely dependent on advertising revenue generated on its social media platforms), but also faster growth. Its third-quarter revenue rose 26% year over year to $51.2 billion. Additionally, the lifeblood of Meta's business -- users -- remained healthy. Meta's total daily active users across all of its apps rose 8% year over year to 3.54 billion.
NASDAQ: META
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Meta also spelled out how it is producing that growth: ad impressions rose 14% year over year, while the average price per ad rose 10%. This was "largely driven by improved ad performance," which attracted greater demand for advertising, said Meta chief financial officer Susan Li during the company's third-quarter earnings call.
Of course, Meta is also spending heavily. Capital expenditures in Q3 were $19.4 billion, and management guided to full-year 2025 capital expenditures between $70 billion and $72 billion.
This is the better AI growth stock to buy right now
Which stock is the better buy? I believe the answer boils down to two things: valuation and growth.
As of this writing, Meta trades at about 21 times forward earnings (analysts' consensus forecast for earnings over the next 12 months), while Alphabet trades closer to 29 times forward earnings.
Ultimately, Meta offers a better price for the growth investors are getting today. Yes, Alphabet boasts a more diversified business with a powerful Google Cloud unit, but Meta's overall business is growing much faster than Alphabet's.
Still, Alphabet is a great business and a solid stock, too. Its more diversified business -- plus Google Cloud's 34% growth rate -- can justify investors paying a higher multiple than they pay for a more ad-concentrated model. But the valuation gap between the two is simply too big to be able to recommend Alphabet over Meta.
Of course, there are risks for both companies. Both, for instance, are subject to regular regulatory scrutiny. And both companies are highly dependent on advertising revenue, which is, in turn, heavily reliant on the macroeconomic environment. Further, both tech companies are subject to potential disruption. Overall, though, I think Meta's cheaper valuation does a better job of pricing in the risks it faces.
