Stock-Split Watch: Is Alphabet Next?
Alphabet Inc. (NASDAQ: GOOG)(NASDAQ: GOOGL) has recently posted impressive quarterly earnings to kick off 2025, showcasing its resilience in a volatile market. However, this strong performance has not significantly influenced its share price, which has seen a decline of approximately 18% year-to-date. As investors look for potential catalysts for recovery, the possibility of a stock split looms large. With several prominent tech companies, including Alphabet, having previously engaged in stock splits, could this be a mechanism for driving better performance for the tech giant? Let’s delve into the likelihood of this and assess the potential for investing in Alphabet regardless.
The Most Recent Alphabet Stock Split
Stock splits are a common strategy used by companies to make shares more accessible by lowering their price while increasing the number of shares outstanding. It’s essential to understand that a stock split does not inherently alter the company’s value; instead, it can enhance the attractiveness of the stock to investors due to its decreased price point. Alphabet executed a significant 20-for-1 stock split on July 15, 2022. Prior to the split, shares were trading at about $2,255, but post-split, the trading price adjusted to around $113, opening doors for a broader pool of investors.
Since that stock split, Alphabet has yielded an impressive 38% return. Nevertheless, this growth lags behind the performance of the S&P 500 during the same timeframe. At present levels, conducting another stock split may lack a compelling justification, as the current share price isn’t prohibitively high and hasn’t deterred investment interest. Consequently, the likelihood appears slim that Alphabet will pursue another stock split in the immediate future. Still, there are robust reasons to consider adding Alphabet stocks to your investment portfolio.
Why Alphabet is One of the Top Tech Stocks
Alphabet stands as a dominant player in several technology sectors, particularly with its flagship offerings. Google maintains its position as the leading search engine, holding nearly 90% of market share according to StatCounter. The company’s Android operating system commands a 72% share in the mobile operating system market, while Chrome remains the top web browser with a commanding 66% share. Furthermore, Alphabet’s ownership of YouTube has placed it at the forefront of media distribution, capturing 12% of overall TV viewing in March, according to Nielsen data, surpassing other major competitors like Disney+ and Netflix.
In tandem with these products, Alphabet’s financial performance has been robust, posting $90.2 billion in revenue during the first quarter of 2025, representing a year-over-year increase of 12%. A standout feature of Alphabet’s investment case lies in its forward-thinking approach to new technology. The company has consistently committed substantial resources to emerging technologies, particularly artificial intelligence (AI). Recent developments include the rollout of its Gemini chatbot and the incorporation of AI Overviews in Google search results.
Presently, Alphabet’s stock is priced lower than it has been since 2023, offering a favorable opportunity for potential investors. For those interested in capitalizing on Alphabet’s core business, this may be an opportune moment to consider purchasing shares.
The Bear Case for Alphabet
Despite its many strengths, Alphabet’s stock price has faced challenges due to various factors. One major concern emerged last year when a federal judge determined that Google had illegally accrued monopoly power through its online search operations. While a definitive penalty is still pending, the U.S. Department of Justice has proposed that Alphabet divest its Chrome browser and advertising business, leading to uncertainty about the company’s future.
This legal situation could impose penalties that negatively impact Alphabet’s business, but the degree of potential damage remains uncertain as the company might appeal the ruling. Additionally, Alphabet’s heavy reliance on advertising revenue raises concerns, given that businesses often reduce advertising expenditures during economic downturns. Notably, Google advertising accounted for 74% of reported revenue in the first quarter of 2025, a striking number compared to 99% a decade ago. Thankfully, Alphabet has diversified its revenue streams and continues to invest in AI and cloud services, securing agreements such as its recent plan to acquire cloud security platform Wiz.
A Quality Tech Investment, with or without a Stock Split
The prospect of Alphabet executing another stock split in the near future appears unlikely. However, the chances of the company outperforming the market over the next five years seem considerably higher. With a robust portfolio of market-leading products and promising innovations, coupled with impressive financials, Alphabet stands out as a prudent investment choice. The company boasts $74.9 billion in free cash flow over the trailing 12 months, ensuring ample financial resources for future growth initiatives. Additionally, Alphabet holds the title of being the most economically attractive among the “Magnificent Seven” based on its price-to-earnings ratio.
In conclusion, if you’re on the lookout for tech stocks that are reasonably priced, Alphabet should undoubtedly be on your radar.