Alphabet(Nasdaq: Goog)(Nasdaq: Googl) It is often considered to be reliable blue chip supplies. Owns Google, the most commonly used search engine in the world; Android, the largest mobile operating system; Chrome, which dominates the web browser market; And YouTube, a top streaming video platform with over 2.7 billion monthly active users. It also provides a wide range of leading market productivity and infrastructure services.
Over the past decade, Alphabet shares gathered almost 480% as its digital advertising and cloudy companies have spread. From 2014 to 2024, his revenue increased with a complex annual growth rate (CAGR) of 18% because her EPS increased to a Cagr Cagr of 23%.
Image source: Google.
But today is the basic advertising company Alphabet, which in 2024 generated 76% of its revenue, facing three existential challenges. First, Generative artificial (AI) Platforms like Openai Chatgpti change the way people seek information. Secondly, short video platforms like Bytetand’s Tictok and TargetPlatforms‘Radice pull advertisers and viewers from YouTube videos with longer format. And finally, the American regulators of Antitrust’s values press the alphabet to sell Chrome or Android.
Some investors might wonder if the alphabet is convicted of becoming next IBMwho have lost the software markets of PC and Enterprise with their competitors Nimbler in the last four decades. But is it a fair comparison or is it just a bear’s hyperbole that overlooks the real difference between the alphabet and the IBM?
IBM dominated the personal computer science market in the 1980s and the early 1990s, but in fact it did not own an IP none of the components outside the shelves on its computers. As a result, other computer manufacturers produced cheaper “IBM PC clones” with the same hardware. IBM tried to distinguish from these clones with their own operating system, OS/2, but that effort hovered as Microsoft Windows became a dominant axis for IBM PC clones.
These failures forced IBM to move away from the computer market, and eventually sold the work of ThinkPad PC Lenovo In 2005, he also sold the job of Lenovo server in 2014. This withdrawal shows that the fundamental engine for the company’s growth can dry if his Capricorn dries and fails to monitor his competitors.
In the late 2000s and early 2010s, IBM struggled to expand his software for aging business and IT services against divisions against in the cloud competitors like microsoft and AmazonAnd Google. But instead of aggressively investing in new cloud services and turning its local software and services into those based on clouds, IBM focused on the disposal of its weaker units, reducing the costs and buying multiple shares to increase its EPS.
By the time IBM tried to expand his job in a cloud by buying Softlayer 2013, he was already far behind Microsoft, Amazon and Google. His wealth did not improve until 2020, when his cloud chief Arvind Krishna took the helm as his new executive director, seized the job of combat infrastructure services and used his acquisition of Redhat (2019) to expand his hybrid cloudy and AI companies with higher growth.
Bears expect the alphabet to face the same fate as IBM as generative AI platforms are intercepted by more search inquiries and reduce the effectiveness of his search engine and targeted ads. Google tries to make up for his own generative AI platform, twins, but he could still end up as OS/2 markets AI if he lags behind Chatgpt and Microsoft’s Copilot.
Moreover, Android is still an axis of an open code that can be changed by anyone. This facilitates companies like Amazon to launch their own Android (Fire OS) versions and build their own ecosystems aimed at the app. Google’s business in a cloudy platform is still growing, but he is in the far third place in the cloud race behind the Amazon Web Services (AWS) and Microsoft Azure.
Meanwhile, YouTube – which triggers a lot of its advertising growth – does not have a meaningful ditch against a ticter or reel. His top creatives can easily move their contents to those rival platforms and are likely to focus on the one that gives them the biggest cut of their ad revenues. YouTube tries to make up for that pressure expanding its subscriptions, but this strategic shift strongly suggests that the growth of its advertising will be cooled over the next few years.
The US Ministry of Justice (DOJ) could further impair Google’s defense, forcing her to sell Chrome, who collects her users’ information for his basic advertising; and Android, which locks 2.5 billion users in its Google drive apps.
Like the old IBM, Alphabet tries to make up for that pressure by pruning its workforce, reducing costs and buying 11% of its shares in the last five years. However, his future could remain blurry if he fails to keep up with a shift toward AI services.
It is tempting to release the alphabet as the next IBM, but it is still growing much faster than the great blue. His efforts to spread were undeniably clumsy, but they could still be fruitful in the next few years. I would look after his recent challenges, but I would not turn off the surprising return after finally combining my act.
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John Mackey, former Whole Foods Market CEO, Amazon Branch, is a member of the Board of Directors Motley Fool. Randa Zuckerberg, former director of the development of the market and spokeswoman for Facebook and sister of Meta Platform Executive Director Mark Zuckerberg, is a member of the Board of Directors Motley Fool. Suzanne Frey, Executive Director of Alphabeta, is a member of the Board of Directors Motley Fool. Leo sun There are positions on Amazon and the target of platforms. Motley Fool has positions and recommends alphabet, Amazon, international business machines, meta platforms and microsoft. Motley Fool recommends the following options: Long January 2026. $ 395 calls Microsoft and short January 2026. $ 405 calls to microsoft. Motley Fool has disclosure rules.
