Equities have been volatile due to President Donald Trump’s macroeconomic policies, but many corporations have seen hardly any changes to their investment theses despite the uncertainty. So there are still quality stocks investors should strongly consider buying.
Alphabet (GOOG 0.76%) (GOOGL 0.71%) is a great example. The tech leader is down 16% this year, but its financial results and prospects remain attractive. Here’s why investors should consider buying shares and holding onto them for the long term.
Excellent first-quarter results
The threat that tariffs could lead to inflation and an economic recession is weighing on Alphabet. If that happens, the company’s ad business, by far its biggest source of revenue, will suffer. Companies tend to reduce their ad budgets in recessions, along with a drop in discretionary spending. Alphabet’s cloud unit could also feel some negative impact if an economic downturn hits.
In addition to broader market issues, the tech giant is dealing with company-specific headwinds. Alphabet is still battling an antitrust lawsuit that could lead to the company having to get rid of its famous Chrome web browser.
Amid all this uncertainty, Alphabet recently released its first-quarter earnings — and performed well. Revenue increased by 12% year over year to $90.2 billion, while earnings per share came in at $2.81, almost 49% higher than the year-ago period. Even Alphabet’s operating margin of 34% was higher than the 32% it reported in the comparable period of the previous fiscal year.
A strong quarter might not completely assuage the fears of investors, but it certainly doesn’t hurt. Furthermore, Alphabet continues to give us more reasons to be bullish on the stock.
Think long-term
Let’s consider three things that make Alphabet an excellent buy-and-forget option: excellent growth prospects, a wide moat, and its innovative abilities.
On the first point, Alphabet is a leader in artificial intelligence (AI), which is helping drive its already successful cloud computing business to new heights. It also owns YouTube, a leading streaming platform with a growing subscription base. Just with AI and streaming, Alphabet is looking at a massive, high-growth market. YouTube and Google Cloud had a combined annual run rate of $110 billion as of the end of 2024.
It still doesn’t account for even half of Alphabet’s annual revenue, but it’s getting there. While some thought the rise of AI chatbots would disrupt Alphabet’s search dominance, the company has incorporated an AI overview into its search engine, which has been a successful initiative so far. All signs point to AI being a net positive for the company.
Moving on to Alphabet’s moat: It has powerful brand names in Google and Youtube. . And it benefits from the network effect, since more volume on its search engine leads to better, more targeted results, which then lead to even more volume. (YouTube also benefits from a network effect.)
Finally, Alphabet is an innovative leader, which should allow it to survive the worst-case outcome of its antitrust issues, although that’s still in doubt. While the loss of Chrome would be a blow to the company, Alphabet’s greatest strength is not this valuable asset. Instead, it’s the ability to identify lucrative business opportunities and pursue them successfully, while making significant advances. That’s what it did with online search and cloud computing, and it’s now doing the same in AI.
If Alphabet is forced to sell Chrome, you can expect a transition period during which it will seek to make up for that loss. But in the long run, the company should still deliver strong financial results and excellent stock performances. So despite the persistent issues it faces, Alphabet stock is a buy for investors focused on the long game.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Prosper Junior Bakiny has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.
