Top AI Stocks to Watch: Alphabet, Meta, and Microsoft
Chicago, IL – May 13, 2025 – Zacks.com has unveiled the latest stocks highlighted in its Analyst Blog. Daily, Zacks Equity Research analysts scrutinize news and events affecting stocks and the financial markets. Featured companies today include Alphabet Inc. (GOOGL), Meta Platforms Inc. (META), and Microsoft Corp. (MSFT).
Key Insights from Monday’s Analyst Blog
Three AI Giants with Promising Valuations
From January 2023 to January 2025, Wall Street experienced a remarkable rise, largely fueled by the technology sector, particularly the rapid expansion of generative artificial intelligence (AI).
The AI narrative, intertwined with the growth of cloud computing and data centers, remains in its early stages. According to a Bloomberg Intelligence report, the generative AI market is projected to soar to $1.3 trillion over the next decade, up from just $40 billion in 2022.
We have identified three leading AI companies— Alphabet Inc., Meta Platforms Inc., and Microsoft Corp.—that appear to have solid potential for growth.
Alphabet Inc.
Alphabet continues to thrive thanks to robust cloud and search performance. In the first quarter of 2025, GOOGL achieved double-digit revenue growth in search. The company has over 270 million paid subscriptions, with YouTube and Google One driving this momentum.
In the competitive cloud infrastructure sector, Google Cloud stands as the third-largest provider, positioned alongside Amazon’s AWS and Microsoft Azure.
GOOGL is capitalizing on the growing demand for Large Language Models through its advanced AI model, Gemini. The platforms Google Bard and Search Generative Experience utilize Gemini Pro, enhancing user experience, while Google Cloud offers Duet AI, providing tools for developers to streamline software operations.
In 2024, Vertex usage surged 20 times due to strong adoption of Gemini Flash, Gemini 2.0, Imagen 3, and Veo. GOOGL’s recent launch of Gemma 3 includes lightweight models that can operate on a single GPU or TPU. During the Cloud Next 2025 conference in Las Vegas, Alphabet introduced Ironwood, its seventh-generation TPU, anticipated to launch later this year.
Google Cloud’s Cloud Wide Area Network grants enterprises access to its private global fiber network. Additionally, Alphabet revealed its new quantum chip, Willow, and advanced AI model, Gemini 2.5, designed to enhance reasoning and efficiency for developers. Currently, Alphabet holds a Zacks Rank of #3 (Hold).
Positive Earnings Estimate Revisions for GOOGL
Alphabet reported earnings of $2.81 per share for the first quarter of 2025, exceeding the Zacks Consensus Estimate of $2.02. The company generated revenues of $76.49 billion for the quarter, outperforming expectations by 1.3%.
For 2025, revenue estimates project $324.35 billion, reflecting a year-over-year increase of 9.9%, alongside an EPS of $9.43, indicating a 17.3% annual rise. GOOGL’s long-term EPS growth rate at 15.6% significantly outpaces the S&P 500’s 12.4% rate.
Valuation Insights for GOOGL Shares
Currently, Alphabet exhibits a forward P/E of 16.21x for the fiscal year, compared to 18.88x for the industry and 18.62x for the S&P 500. GOOGL’s return on equity stands at 34.54%, substantially higher than the industry average of 5.39% and the S&P 500’s 16.92%.
Brokerage firms currently project a 30.4% price increase for GOOGL from its last closing price of $152.75, with target prices ranging from $160 to $240, indicating a maximum upside potential of 57.1% with no downside risk.
Meta Platforms Inc.
Meta Platforms, holding a Zacks Rank of #3, is experiencing sustained user growth across all regions, especially in Asia Pacific. Greater engagement with platforms like Instagram, WhatsApp, Messenger, and Facebook is significantly boosting growth.
The company’s AI-driven technology is enhancing ad delivery and improving the return on ad spend for advertisers, with strong performance in sectors like e-commerce, gaming, entertainment, and media.
In the first quarter of 2025, META reported earnings of $6.43 per share, surpassing the Zacks Consensus Estimate by 23.2%. Revenues of $42.31 billion for the quarter also exceeded expectations by 2.6%.
In 2025, META’s revenue estimates project $185.8 billion, a 13% year-over-year growth, alongside an EPS of $25.52. This marks a positive outlook driven by the company’s effective strategies and engagement efforts.
Meta and Microsoft Show Strong Financial Growth and Valuation
Meta Platforms reported a year-over-year increase in earnings per share (EPS) of 7%, with a projected long-term EPS growth rate of 16.1%. This growth rate outpaces the S&P 500’s long-term EPS growth rate of 12.4%.
Strong Valuation Metrics for Meta
Currently, Meta shares have a forward price-to-earnings (P/E) ratio of 23.22, compared to an industry average of 28.50 and the S&P 500’s 18.62. The company boasts a remarkable return on equity of 38.69%, significantly higher than the industry average of 0.38% and the S&P 500’s 16.92%.
Brokerage firms project a short-term average price target for Meta shares that reflects a potential increase of 16.3% from the last closing price of $592.49. Price targets range between $466 and $935, suggesting a maximum upside of 57.8% with a downside of 21.3%.
Microsoft’s Robust Performance in Fiscal Q3 2025
Microsoft’s fiscal Q3 2025 results surpassed expectations, driven by growth in AI services and increased adoption of the Copilot feature within its Azure cloud infrastructure. Revenues from Productivity and Business Processes also grew, fueled by strong demand for Office 365 Commercial products. The average revenue per user (ARPU) rise was primarily attributed to the E5 and M365 Copilot offerings.
Intelligent Cloud revenues benefited from the expansion of Azure AI services and the AI Copilot business, while Xbox content and services saw improved revenues, reflecting stronger performance in both third-party and first-party offerings. Microsoft holds a Zacks Rank #2 (Buy).
Positive Earnings Estimates for Microsoft
In its latest report, Microsoft announced third-quarter fiscal 2025 earnings of $3.46 per share, exceeding the Zacks Consensus Estimate by 8.1%. The company’s revenues reached $70.06 billion, also surpassing expectations by 2.5%.
For the full fiscal year ending June 2025, the Zacks Consensus Estimate anticipates revenues of $278.6 billion, indicating a year-over-year improvement of 13.7%, with EPS projected at $13.30, reflecting a 12.7% increase. Microsoft’s long-term EPS growth rate stands at 14.8%, again above the S&P 500’s long-term rate.
Valuation Analysis of Microsoft Stock
Microsoft’s current forward P/E ratio is 32.74, compared to industry peers at 17.57 and the S&P 500 at 18.62. The company reports a return on equity of 32.74%, significantly higher than the industry average of 17.57% and the S&P 500’s 16.92%.
Brokerage firms currently forecast a short-term average price target that represents a 15.8% increase from the last closing price of $438.73. Price targets range from $448 to $626, indicating a maximum upside of 42.7% with no projected downside.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
