Alphabet and Meta: A Clash of Tech Giants in Growth Prospects

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), the parent company of Google, is viewed as a solid long-term investment. During the past decade, the tech giant’s stock has surged over 480%, driven by growth in its advertising and cloud businesses.

From 2014 to 2024, Alphabet’s revenue expanded at a compound annual growth rate (CAGR) of 18%, while its earnings per share (EPS) grew at a CAGR of 23%. Analysts project that between 2024 and 2027, the company’s revenue and EPS will rise at rates of 11% and 13%, respectively. Despite this positive outlook, Alphabet faces significant challenges as its core business matures.

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Challenges for Alphabet Amid Rising Competition

New generative artificial intelligence (AI) platforms, such as OpenAI’s ChatGPT, are reshaping search behaviors and posing a threat to Alphabet’s core search engine. Additionally, ByteDance’s TikTok, along with Meta Platforms‘ (NASDAQ: META) Reels, and other short-form video platforms are gaining traction at YouTube’s expense. Moreover, independent advertising technology firms like The Trade Desk are attracting advertisers away from Alphabet. Google has not yet established a significant foothold in social media, e-commerce, or hybrid “social shopping” arenas and ranks third in the cloud infrastructure market behind Amazon Web Services (AWS) and Microsoft Azure.

Alphabet also faces intense scrutiny from antitrust regulators. The U.S. Department of Justice (DOJ) is pushing for Google to divest Chrome, the leading web browser, due to its data collection practices that bolster its dominance in search and targeted advertising. The DOJ is also advocating for limitations on how Google promotes its services on Android devices.

If these divestments and restrictions occur, they could hinder Alphabet’s growth and weaken its competitive stance against Microsoft and Amazon in cloud and AI sectors. Should Alphabet fail to address these challenges, it risks becoming a slower-growth company reminiscent of IBM over the coming decade. If that scenario unfolds, the market cap of one of its rivals, like Meta Platforms—currently valued at $1.35 trillion—could surpass Alphabet’s market cap of $1.95 trillion within the next ten years.

Meta’s Strong Position in Social Media

Meta, which owns Facebook, Instagram, Messenger, and WhatsApp, leads the social networking industry with 3.35 billion daily active users across its apps by the end of 2024. This accounts for 40% of the global population, reflecting a 5% increase from its 3.19 billion daily active users at the end of 2023.

During the same period from 2014 to 2024, Meta’s revenue and EPS increased at a CAGR of 29% and 36%, respectively, outpacing Alphabet’s growth. Meta’s dominance in the social media market has altered interpersonal communication and allowed the company to capitalize on valuable data for targeted advertising. The acquisitions of Instagram in 2012 and WhatsApp in 2014 further expanded Meta’s ecosystem and solidified user loyalty.

Looking ahead, analysts forecast Meta’s revenue and EPS to grow at CAGRs of 13% and 11%, respectively, between 2024 and 2027. While this growth may appear similar to Alphabet’s, Meta faces fewer immediate threats. It is actively responding to TikTok with Reels, leveraging AI for ad placements, and attracting small merchants to set up shops on Instagram for enhanced presence in the social commerce arena. Additionally, Meta has positioned itself advantageously in the emerging virtual and augmented reality markets.

The Potential for a Shift in Market Valuation

Currently, Meta and Alphabet trade at respective price-to-earnings ratios of 21x and 18x for this year. Assuming both companies achieve analysts’ targets, continue growing their EPS at a CAGR of 10% from 2027 to 2035, and aim for valuations at 20 times forward earnings, here is a projection of how much Meta and Alphabet might be worth by early 2035:

Data source: Marketscreener.

These projections assume that Meta maintains steady growth and Alphabet avoids significant disruption in AI, cloud, and advertising sectors. If Alphabet meets Wall Street’s estimates through 2027 but only experiences 5% EPS growth over the next eight years, trading at 15 times forward earnings, its stock price might rise 65% to $257, elevating its market cap to $3.22 trillion.

Conversely, if Meta fulfills analysts’ projections through 2027, grows its EPS at a faster CAGR of 15% until 2035, and trades at 25 times forward earnings, its stock price could surge nearly 380% to $2,514 per share, pushing its market cap to $6.47 trillion.

The Future Remains Uncertain

Determining whether Meta will surpass Alphabet in value by 2035 is speculative, given the multitude of factors that could influence outcomes over the next decade. Nevertheless, Meta currently possesses a broader range of growth opportunities compared to Alphabet, which has been criticized for lacking innovation in capitalizing on its online search dominance across social media, e-commerce, short-form video, cloud infrastructure, and generative AI markets.

As it stands, Meta is well-positioned to potentially surpass Alphabet in market value over the coming decade. However, labeling Alphabet as the “next IBM” and presuming its high-growth phase is over might be premature.

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Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board. Randi Zuckerberg, a former director at Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is also on the board. John Mackey, the former CEO of Whole Foods Market, and Leo Sun, who has investments in Amazon and Meta Platforms, are additionally part of The Motley Fool’s leadership. The Motley Fool recommends various companies, including Alphabet, Amazon, International Business Machines, Microsoft, and The Trade Desk. They also advocate for specific stock options, such as long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool maintains a strict disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily represent those of Nasdaq, Inc.