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GOOGL, META, MSFT: 3 Promising AI Giants With Attractive Valuations

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Wall Street’s high-flying northward journey from January 2023 to January 2025 was predominantly supported by an astonishing rally in the technology sector, buoyed by the explosive growth of generative artificial intelligence (AI).

The AI saga, supported by the massive growth of cloud computing and data centers, is yet to fully unfold. According to a report by Bloomberg Intelligence, “The generative AI market is poised to explode, growing to $1.3 trillion over the next 10 years from a market size of just $40 billion in 2022.”

Here we have identified three generative AI behemoths — Alphabet Inc. (GOOGL - Free Report) , Meta Platforms Inc. (META - Free Report) and Microsoft Corp. (MSFT - Free Report) — that look promising in the near term. 

Alphabet Inc.

Alphabet is riding on strong cloud and search growth. In first-quarter 2025, GOOGL saw continued double-digit revenue growth in search. Alphabet surpassed 270 million paid subscriptions with YouTube and Google One as the key drivers.

Google Cloud has solidified its position as the third-largest provider in the highly competitive cloud infrastructure market against Amazon.com Inc.’s (AMZN) cloud arm, Amazon Web Services, and Microsoft’s Azure.

GOOGL is cashing in on the increasing demand for Large Language Models with its most powerful AI model called Gemini. Google Bard and Search Generative Experience are powered by Gemini Pro to deliver an enhanced user experience. Google Cloud offers Duet AI, which provides pre-packaged AI agents that assist developers in writing, testing, documenting and operating software. 

Vertex usage increased 20 times in 2024, with strong developer adoption of Gemini Flash, Gemini 2.0, Imagen 3 and Veo. GOOGL launched Gemma 3, a collection of lightweight, state-of-the-art open models that can run on a single GPU or Tensor Processing Unit (TPU). At its Cloud Next 2025 conference in Las Vegas, Alphabet unveiled Ironwood, its seventh-generation TPU, expected to be available later this year. 

Google Cloud unveiled its Cloud Wide Area Network, giving enterprises access to its private global fiber network. Alphabet also showcased Willow, its new quantum chip while on the AI model front, Alphabet launched Gemini 2.5, its most advanced reasoning model, alongside Gemini 2.5 Flash, a low-latency, cost-efficient version tailored for developers. Alphabet currently carries a Zacks Rank #3 (Hold). 

Solid Earnings Estimate Revisions for GOOGL Stock

Alphabet came up with first-quarter 2025 earnings of $2.81 per share, beating the Zacks Consensus Estimate of $2.02 per share. GOOGL posted revenues of $76.49 billion for the quarter, surpassing the Zacks Consensus Estimate by 1.3%.

For 2025, the Zacks Consensus Estimate currently shows revenues of $324.35 billion, suggesting an improvement of 9.9% year over year and earnings per share of $9.43, indicating an increase of 17.3% year over year. GOOGL currently has a long-term (3-5 years) EPS growth rate of 15.6%, well above the S&P 500’s long-term EPS growth rate of 12.4%.

Lucrative Valuation of GOOGL Shares

Alphabet currently carries a forward P/E of 16.21X for the current financial year, compared with 18.88X of the industry and 18.62X of the S&P 500. GOOGL has a return on equity of 34.54% compared with 5.39% of the industry and 16.92% of the S&P 500 Index. 

At present, the short-term average price target of brokerage firms for the stock represents an increase of 30.4% from the last closing price of $152.75. The brokerage target price is currently in the range of $160-$240. This indicates a maximum upside of 57.1% and no downside. 

Zacks Investment Research
Image Source: Zacks Investment Research

Meta Platforms Inc.

Zacks Rank #3 Meta Platforms is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement with its offerings like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver.

META’s artificial intelligence (AI)-driven platform is enhancing ad delivery efficiency and increasing return on ad spend for advertisers. Solid performance in spaces like e-commerce, gaming, entertainment, and media is benefiting Meta Platforms.

META has shown strong execution of its businesses as first-quarter 2025 earnings results handsomely beat both the top and bottom-line estimates. Family daily active people totaled 3.43 billion versus the average estimate of 3.38 billion. 

Average Revenue Per Person came in at $12.36 compared to the average estimate of $12.14. Advertising revenues were $41.39 billion compared to the consensus estimate of $40.44 billion. The reported number represents a year-over-year increase of 16.2%.

Meta Platforms is exploring chat experiences in WhatsApp and Messenger, visual creation tools for posts on Facebook and Instagram and ads. Gradually, META is expected to introduce AI for video and multi-modal experiences. Meta Platforms believes AI tools will improve the business messaging experience and customer support.

On July 24, 2024, META unveiled its Llama 3 AI model. Using NVIDIA’s latest HDX H200 chip that supports Meta Platforms’ Llama 3 AI model, an investment of $1 by an API provider can generate $7 in revenues over the next four years. This mostly free Llama 3 model and its advanced version to be released next year aim to compete with incumbents like Open AI. 

Strong Earnings Estimate Revisions for META Stock

Meta Platforms came up with first-quarter 2025 earnings of $6.43 per share, beating the Zacks Consensus Estimate by 23.2%. META posted revenues of $42.31 billion for the quarter, surpassing the Zacks Consensus Estimate by 2.6%.

For 2025, the Zacks Consensus Estimate currently shows revenues of $185.8 billion, suggesting an improvement of 13% year over year and earnings per share of $25.52, indicating an increase of 7% year over year. META currently has a long-term (3-5 years) EPS growth rate of 16.1%, well above the S&P 500’s long-term EPS growth rate of 12.4%.

Attractive Valuation of META Shares

Meta Platforms currently carries a forward P/E of 23.22X for the current financial year, compared with 28.50X of the industry and 18.62X of the S&P 500. META has a return on equity of 38.69% compared with 0.38% of the industry and 16.92% of the S&P 500 Index. 

At present, the short-term average price target of brokerage firms for the stock represents an increase of 16.3% from the last closing price of $592.49. The brokerage target price is currently in the range of $466-$935. This indicates a maximum upside of 57.8% and a downside of 21.3%.

Zacks Investment Research
Image Source: Zacks Investment Research

Microsoft Corp. 

Microsoft’s third-quarter fiscal 2025 earnings and revenues beat estimates driven by strength in AI business and Copilot adoption backed by accelerating growth in the Azure cloud infrastructure unit. Productivity and Business Processes revenues rose due to the strong adoption of Office 365 Commercial solutions. MSFT’s ARPU growth was driven by E5 as well as M365 Copilot. 

MSFT’s Intelligent Cloud revenues were driven by growth in Azure AI services and a rise in AI Copilot business. Focused execution drove non-AI services results aided by accelerated growth in the enterprise customer segment as well as some improvement in scale motions. MSFT’s Xbox content and services revenues benefited from stronger-than-expected performance in third-party and first-party content. Microsoft currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Excellent Earnings Estimate Revisions for MSFT Stock

Microsoft came up with third-quarter fiscal 2025 earnings of $3.46 per share, beating the Zacks Consensus Estimate by 8.1%. MSFT posted revenues of $70.06 billion, surpassing the Zacks Consensus Estimate by 2.5%.

For fiscal 2025 (ending June), the Zacks Consensus Estimate currently shows revenues of $278.6 billion, suggesting an improvement of 13.7% year over year and earnings per share of $13.30, indicating an increase of 12.7% year over year. MSFT currently has a long-term (3-5 years) EPS growth rate of 14.8%, well above the S&P 500’s long-term EPS growth rate of 12.4%.

Impressive Valuation of MSFT Shares

Microsoft currently carries a forward P/E of 32.74X for the current financial year, compared with 17.57X of the industry and 18.62X of the S&P 500. MSFT has a return on equity of 32.74% compared with 17.57% of the industry and 16.92% of the S&P 500 Index. 

At present, the short-term average price target of brokerage firms for the stock represents an increase of 15.8% from the last closing price of $438.73. The brokerage target price is currently in the range of $448-$626. This indicates a maximum upside of 42.7% and no downside.

Zacks Investment Research
Image Source: Zacks Investment Research


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