Alphabet Valuation

The valuation is attached in an Excel file.

Alphabet Inc. (GOOGL / GOOG)

Name: Alphabet Inc.
Ticker Symbol: GOOGL / GOOG (NASDAQ)
Founded: 1998 by Larry Page and Sergey Brin
Headquarters: Mountain View, California, USA
Industry: Technology – Internet Services, Digital Advertising, Cloud Computing, Artificial Intelligence

Company Overview

Alphabet Inc. is a global technology conglomerate best known for Google, its core subsidiary, which dominates online search, digital advertising, and mobile operating systems. The company operates a diversified business model spanning advertising, cloud services, consumer hardware, and emerging technologies, including artificial intelligence and autonomous systems. Alphabet benefits from strong network effects, high margins in its advertising segment, and a robust balance sheet with significant cash reserves.

General Notes

Alphabet’s dominant position in global search and digital advertising remains its primary competitive advantage. Google Search continues to command a leading market share, supported by an unparalleled data ecosystem and advanced AI-driven algorithms. The integration of artificial intelligence into core products, including search, advertising, and productivity tools, strengthens Alphabet’s long-term value proposition.

Google Cloud has emerged as a key growth driver, contributing to revenue diversification beyond advertising. While still smaller than competitors in absolute scale, the cloud segment shows improving margins and operating leverage, supporting long-term profitability assumptions in the valuation model.

Artificial intelligence represents both an opportunity and a structural shift for Alphabet. The company’s significant investments in AI infrastructure, proprietary models (such as Gemini), and data centers position it as a long-term beneficiary of AI-driven demand. However, the pace of technological change introduces uncertainty, particularly regarding monetization efficiency and competitive dynamics.

Despite these uncertainties, Alphabet generates strong free cash flow and maintains a conservative capital structure. The company’s substantial cash holdings provide flexibility for strategic investments, acquisitions, and shareholder returns, reinforcing its intrinsic valuation support.

Bull Case

1. Artificial intelligence is successfully integrated into Google’s core products, enhancing user engagement and advertising monetization.
2. Gemini and other proprietary AI models strengthen Alphabet’s competitive moat against rival AI platforms.
3. Google Cloud continues to gain market share and improves profitability, reducing reliance on advertising revenues.

Bear Case

1. Core search revenues, which represent a significant portion of total revenues, face disruption from AI-driven alternatives and changing user behavior.
2. Users may increasingly shift between AI platforms, reducing switching costs and weakening long-term pricing power.

Risks

1. Regulatory and policy risks, particularly antitrust scrutiny and potential fines, remain material given Alphabet’s market dominance.
2. Anti-trust actions could limit business practices or force structural changes, impacting long-term margins.
3. Rapid technological evolution in artificial intelligence increases the risk of business model disruption and obsolescence if innovation cycles accelerate beyond expectations.

DCF & COMPS ANALYSIS Scenarios & Stock Intrinsic Values:

DCF Worst Scenario: $167,62 COMPS Worst Scenario: $247,1

DCF Base Scenario: $202,69 COMPS Base Scenario: $253,1

DCF Best Scenario: $240,95 COMPS Best Scenario: $286

Valuation Considerations

About Valuation Assumptions & Methods :

This valuation is based on a high-level DCF framework, designed to estimate intrinsic value without building a fully detailed model. Due to time constraints related to my academic workload, I focused on key value drivers rather than preparing detailed revenue, cost, reinvestment, and ROE-based schedules. Instead, future growth assumptions were derived from historical growth trends, adjusted to reflect more sustainable forward expectations.

I use a 5-year forecast period, however applying adjusted growth rate forecasts for different businesses with a strong economic moat or significant comparative advantage to reflect their ability to sustain superior performance over a longer horizon.

I used both the exit multiples method and the perpetuity model to determine the terminal value, applying a weighted average depending on the business sector. Additionally, I assumed that amortization and reinvestment grow at a constant rate, equal to the average growth rate of total costs (excluding COGS) from past years.

When calculating equity value from enterprise value, if the market value of debt was unavailable, I used the book value of debt.

I avoided Forward P/E in comps analysis, since I prefer comparing actual results instead of relying on analyst estimates.

For growth projections, I also considered the most recent quarterly results of the last fiscal year, incorporating them into forward expectations (without annualizing).

For depreciation & amortization, I applied the general operating expense growth rate. I did not prepare detailed schedules due to time constraints.

For CapEx, Rather than building a detailed CapEx schedule, CapEx is modeled as a percentage of revenues during the explicit forecast and terminal periods, reflecting scalable infrastructure investment and long-term normalization.

Disclaimer

This valuation is prepared for personal and analytical purposes only and does not constitute investment advice.