Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL), the parent company of Google, was once considered an evergreen play on the online search, digital advertising, and cloud markets. However, its stock has declined about 17% this year as the S&P 500 dipped just 1%.
Alphabet has been grappling with tough macro, competitive, and regulatory headwinds.
The weak macro environment is throttling its ad sales, its core search engine faces fierce competition from OpenAI's ChatGPT and other generative AI platforms, and the U.S. Department of Justice is pressing Alphabet to sell Chrome and share its valuable search data with its competitors. It's also struggling to keep up with competitors in the cloud infrastructure and artificial intelligence (AI) markets.
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Those headwinds are making Alphabet a lot less attractive to long-term investors. For 2025, analysts still expect its revenue and earnings to grow 11% and 19%, respectively, but the company could eventually become a slow-growth stock like IBM as its main engines sputter out.
Its forward price-to-earnings ratio of 16 looks cheap, but it could continue to trade at that discount if investors doubt its ability to counter those competitive and regulatory challenges. So instead of waiting for Alphabet to turn around its massive business, investors should consider buying two other tech stocks that face fewer existential challenges: Microsoft(NASDAQ: MSFT) and Oracle(NYSE: ORCL).
1. Microsoft
When Microsoft's cloud chief Satya Nadella took the helm as its CEO in 2014, the tech giant adopted a "mobile first, cloud first" strategy to reduce its dependence on desktop applications. To achieve that, Microsoft converted more of its productivity software into cloud-based services and mobile apps. The company also expanded its cloud infrastructure platform, Azure, and integrated more cloud-based services into Windows.
Microsoft's transformation initially squeezed its operating margins, but paid off over the long term as it locked more users into its mobile and cloud ecosystems. Today, Azure is the world's second largest cloud infrastructure platform after Amazon Web Services (AWS), according to Canalys. Alphabet's Google Cloud ranks a distant third. Microsoft also expanded its Xbox gaming segment with big acquisitions as it rolled out new Surface devices.
From fiscal 2014 to fiscal 2024 (which ended June 2024), Microsoft's revenue grew at a compound annual growth rate (CAGR) of 11% as its earnings per share (EPS) rose at a CAGR of 16%. Its stock rallied nearly 840% over the past decade.
Microsoft's future looks brighter than Alphabet's. Microsoft's big investment in OpenAI allows it to integrate many of the start-up's generative AI tools into its own Bing search engine, Copilot AI assistant, and Azure services. It still faces some antitrust probes regarding its bundling practices, but it's not being as heavily scrutinized as Alphabet.
From fiscal 2024 to fiscal 2027, analysts expect Microsoft's revenue and EPS to grow at a CAGR of 14% and 15%, respectively. Its stock looks reasonably valued at 29 times forward earnings, and it could have plenty more room to run as its cloud and AI businesses expand.
2. Oracle
Oracle, one of the world's largest database software providers, also successfully transformed into a cloud company over the past decade. Under Safra Catz, who has served as its CEO since 2014 (along with her co-CEO, Mark Hurd, until his death in 2019), Oracle replaced a lot of its on-premise applications with cloud-based services and expanded its own cloud infrastructure platform. It also acquired a lot more companies -- including the enterprise resource planning (ERP) leader Netsuite and the healthcare IT giant Cerner -- to broaden its ecosystem.
That forward-thinking strategy prevented Oracle from being left behind by bigger cloud competitors like Amazon, Microsoft, and Google. From fiscal 2014 to fiscal 2024 (which ended May 2024), its revenue and EPS grew at a CAGR of 3% and 5%, respectively. It also repatriated a lot of its overseas cash and bought back 35% of its shares over the past decade.
From fiscal 2024 to fiscal 2027, analysts expect Oracle's revenue and EPS to rise at a CAGR of 13% and 19%, respectively. That acceleration should be driven by the growth of the AI market, which is driving more customers to run their AI workloads on its cloud infrastructure platform. It's also expanding its own cloud-based AI ecosystem with dozens of AI models and hundreds of embedded AI agents for cloud applications, and it's rolling out new tools that allow database customers to train large language models (LLMs) with their own first-party data.
Unlike Alphabet and Microsoft, Oracle isn't dealing with any major antitrust investigations. Its stock isn't a bargain at 31 times next year's earnings, but the company accelerating growth and exposure to the booming cloud and AI markets should justify that higher valuation. Simply put, investors looking for a more stable alternative to Alphabet should consider this oft-overlooked tech giant.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, International Business Machines, Microsoft, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
