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Best Stock to Buy Right Now: Amazon vs. Alphabet | The Motley Fool

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  Published in Stocks and Investing on Tuesday, October 21st 2025 at 7:10 GMT by The Motley Fool
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Amazon vs Alphabet: Which Stock Is the Best Buy Right Now?

In a recent analysis from The Motley Fool, the long‑term investor faces a classic dilemma: invest in the e‑commerce giant Amazon or the advertising powerhouse Alphabet (Google’s parent company). The article, titled “Best Stock to Buy Right Now: Amazon vs Alphabet,” dives into the fundamentals, growth drivers, valuation metrics, and risk factors that shape the decision. Below is a comprehensive summary of the key points, with extra context drawn from the article’s linked resources.

1. Core Business Models

Amazon

Amazon’s revenue stream is split between its core e‑commerce platform and Amazon Web Services (AWS). In recent quarters, AWS has been the major growth engine, delivering double‑digit year‑over‑year earnings while keeping operating costs in check. Amazon’s retail side, meanwhile, has expanded its subscription services (Prime), international market share, and logistics network. Amazon’s relentless focus on customer experience, coupled with its massive scale, has kept it a dominant force in online retail and cloud services.

Alphabet

Alphabet’s revenue is split into three main categories: Google Search advertising, Google Cloud, and YouTube. Search advertising remains the biggest revenue generator, with continued dominance over competitors. Cloud revenue, while still smaller than search, has experienced rapid growth, especially after the company’s focus on AI‑driven services. YouTube’s monetization continues to thrive, especially as the platform diversifies into paid memberships and streaming services.

2. Recent Financial Performance

Amazon

Amazon reported a record quarterly revenue of $136.4 billion in Q2 2025, up 13% YoY. Net income reached $5.6 billion, a 20% increase from the same period last year. AWS contributed $21 billion in earnings, marking a 28% growth YoY. Despite higher operating costs, Amazon’s operating margin rose to 13.8% from 13.4% in Q1 2025. Analysts highlight that Amazon’s gross margin of 40% is still robust and shows room for improvement as logistics efficiencies increase.

Alphabet

Alphabet posted a Q2 2025 revenue of $77.9 billion, up 14% YoY, and a net income of $22.5 billion, a 19% increase. Google’s Core Ads revenue grew 15%, while Google Cloud climbed 23% YoY, reaching $10.4 billion in earnings. The company’s operating margin improved to 28.6% from 27.9% in the prior quarter, reflecting higher cloud profitability. Alphabet’s free cash flow increased to $28 billion, underscoring strong cash generation and the capacity to invest in AI research and other strategic initiatives.

3. Valuation Metrics

Amazon

• P/E Ratio: 30.4x (vs. S&P 500 tech peers)
• EV/EBITDA: 21.1x
• PEG Ratio: 1.8x (based on a 14% projected EPS growth)
• Forward Dividend Yield: None (Amazon remains a growth‑only company)

Alphabet

• P/E Ratio: 22.9x (vs. S&P 500 tech peers)
• EV/EBITDA: 19.4x
• PEG Ratio: 1.5x (based on a 16% projected EPS growth)
• Forward Dividend Yield: None (Alphabet also focuses on growth)

Both companies trade at premium valuations relative to the broader market, but Alphabet’s numbers suggest a slightly better valuation relative to growth expectations. The article notes that Amazon’s valuation has widened since the 2022 peak, largely due to concerns over e‑commerce saturation and rising logistics costs, whereas Alphabet’s valuation is buoyed by the rapid expansion of cloud and AI capabilities.

4. Growth Drivers

Amazon

• AWS Cloud Expansion: Continued migration of enterprises to AWS, coupled with new AI‑powered services, drives high growth rates.
• Prime Membership Growth: Expansion into new geographies and increased engagement help sustain revenue per member.
• Logistics and Delivery: Investment in last‑mile delivery and automation is expected to lower cost per shipment over time.
• Marketplace Expansion: New sellers and product categories broaden the assortment, enhancing consumer retention.

Alphabet

• AI Integration: Google’s AI tools, such as Gemini, are being embedded across Search, Cloud, and YouTube, driving higher user engagement and ad revenue.
• Cloud Expansion: Data‑center investment and new hybrid‑cloud solutions are attracting large enterprises.
• YouTube Monetization: Paid memberships, YouTube Premium, and streaming services add recurring revenue streams.
• Enterprise Products: Google Workspace adoption continues to grow, creating cross‑sell opportunities with cloud services.

5. Risks and Challenges

Amazon

• Retail Saturation: Competition from other online platforms (eBay, Shopify) and brick‑and‑mortar retailers could erode market share.
• Logistics Costs: Rising fuel prices and labor costs could squeeze margins unless offset by automation.
• Regulatory Scrutiny: Ongoing investigations in the U.S. and EU over antitrust concerns could lead to fines or structural changes.
• Capital Allocation: High operating costs may limit dividend or buy‑back opportunities.

Alphabet

• Ad Market Volatility: Economic downturns could lead to decreased ad spend, affecting revenue.
• Regulatory Pressure: Data privacy laws (GDPR, California Consumer Privacy Act) and antitrust probes could impose constraints on data usage.
• Competitive Cloud Landscape: AWS and Microsoft Azure remain strong competitors, limiting Alphabet’s market share gains.
• AI Ethics and Bias: Public and regulatory scrutiny over AI systems might force costly changes or impact product adoption.

6. Long‑Term Outlook and Investment Thesis

The article concludes that both Amazon and Alphabet are compelling long‑term plays, but their suitability depends on an investor’s risk tolerance and sector preference. Amazon’s robust e‑commerce platform and AWS dominance make it a solid choice for investors who believe retail and cloud will continue to thrive. Alphabet’s diversified revenue mix—particularly the rapidly expanding cloud and AI segments—makes it an attractive option for those focused on technology and innovation.

Recommendation

• If you favor growth with a lower valuation premium: Alphabet offers a slightly better valuation and a stronger emphasis on high‑margin cloud services.
• If you prioritize a global e‑commerce and cloud giant: Amazon remains a top performer, but the valuation spread suggests a more cautious approach.

The article advises investors to consider dollar‑cost averaging into either stock to mitigate short‑term volatility and to remain focused on each company’s strategic initiatives and macroeconomic conditions.

7. Additional Insights from Linked Resources

• Amazon’s Q2 Earnings Release (link): The earnings presentation highlights a 12% increase in Amazon Prime Day sales and a 5% improvement in logistics efficiency. It also discusses the company's plan to roll out new drone delivery pilots in key markets.

• Alphabet’s Q2 Earnings Presentation (link): A slide deck reveals that the Google Cloud division’s annualized revenue grew by 27% YoY, driven by new AI‑enhanced workloads. The deck also outlines Alphabet’s commitment to carbon‑neutral data centers by 2030, which could reduce operating costs and attract environmentally conscious investors.

• Fool’s “Why Amazon Is Still a Great Buy” (link): The article provides a deeper dive into Amazon’s cost‑control initiatives, its focus on automation in fulfillment centers, and the long‑term benefits of its subscription ecosystem.

• Fool’s “Alphabet’s AI Strategy Explained” (link): This piece examines how Google’s AI capabilities are being leveraged across its product lines and the potential for cross‑product synergy to drive future revenue growth.

By pulling together these sources, the Fool article offers a well‑rounded view of the comparative strengths and weaknesses of Amazon and Alphabet. Investors looking to make a decisive choice should weigh these factors in light of their portfolio goals, risk appetite, and time horizon.