Alphabet Attracts Despite Antitrust Risk Amid Strong Growth
Alphabet's (GOOGL) antitrust risk has been a major concern for investors, but despite this, the company still looks attractive. Its search business continues to generate strong growth and cash flow, with Google remaining the dominant search engine. A federal judge ruled in 2024 that Google violated antitrust law by paying Apple (AAPL) to make it the default search engine, but the case remains under appeal.
The market generally dislikes long-running legal processes, but a long appeal is far superior to a breakup of the company's flagship offering. In 2025, Judge Mehta ruled against the Justice Department's decision to force Alphabet to sell Chrome and Android. Google filed its notice of appeal in January 2026, which was followed by a government push to end the Apple default deal and pursue the Chrome sale.
Google's search business has continued to grow, with revenue rising 24% to $119.8 billion in the second quarter. This growth is driven by Google's AI features, which are strengthening the core business rather than replacing it. Meanwhile, Google Cloud is quickly becoming a high-margin profit driver, with cloud revenue jumping 82% to $24.8 billion.
Alphabet has increased its AI investments significantly, lifting its capital spending forecast to between $195 billion and $205 billion. This spending will be funded by the company's cash flow, which has slipped to about $53 billion due to negative free cash flow of $5.9 billion in the second quarter.
The stock trades at a discount to most of its Big Tech peers, with a forward P/E ratio of 16.6x. The market discounted Alphabet for legal risk and heavy spending, but this gap looks too wide for a company growing revenue in the mid-20s percentage with a fast-rising, high-margin cloud business.