Beyond its Google search engine, Alphabet is involved in energy storage, self-driving cars, and deep-sea cables
Do investors need to support the tech behemoth?
The parent company of Google, Alphabet, is listed in the US and is worth more than the whole UK stock market. In fact, the Google name has become so commonplace that it is now used as a verb all over the world, and billions of people use its search engine every day. Alphabet is not just Google, though. An empire encompassing everything from deep-sea cables to self-driving cars and energy storage exists beyond search and advertising revenue. The company is quickly rising to the position of one of the most significant businesses in history by using the billions it receives from search ads to finance large bets on the future.
The company's goal to finance independent wagers that yield "alpha"a term used in finance to describe an investment that outperforms the overall marketis reflected in the name Alphabet. Alphabet aspires to serve as the foundation for numerous upcoming innovations. The name informed the market that the company was now an incubator of new technology rather than merely a search engine.
Alphabet's ascent from Google search to worldwide dominance.
Alphabet continues to make the most money from search. The company's vast size explains how it can finance so many more ambitious goals. The company was just one of many experimental search engines competing on the early World Wide Web when it started out in a garage in 1998. A proprietary algorithm known as PageRank propelled its quick ascent to dominance. Google ranked pages based on the quality and significance of links pointing to them, in contrast to competing systems that primarily counted how frequently a keyword appeared on a page. Links from reputable universities or well-known news websites were far more credible than those from obscure blogs. This innovation led to a wave of adoption that swiftly resulted in dominance since it produced far more useful search results. In short, Google search outperformed all other methods.
The majority of people still use Google as their primary search engine today. It handles billions of queries every day and holds over 90% of the global search market. In contrast, its nearest competitor, Microsoft's Bing, has a minuscule market share. Furthermore, Google's influence goes well beyond its own homepage. Numerous browsers and software programs worldwide rely on the company's search infrastructure. Because search engines get better through user behavior, rivals find it difficult to imitate what Google has created. As the platform gains more users, it gathers more data and improves the system. Google maintains a self-reinforcing cycle that keeps rivals behind by continuously improving thanks to its capture of the majority of global search data.
Through a system of sponsored results, this continuous flow of searches is converted into income. When a user searches for a term that has commercial value, sponsored links appear at the top of the page, right above the content. Google doesn't charge companies a set amount just to show these links. Rather, it uses a pay-per-click business model, charging a fee each time a user chooses a sponsored result. These little charges add up to billions of dollars in highly predictable revenue because millions of customers use the search box every second to locate goods, services, and nearby companies.
The underlying mechanics require minimal human intervention, which is why this is so profitable. The only way for traditional advertising agencies to expand is by employing hordes of media buyers and account managers to oversee campaigns. By developing an automated, self-service advertising platform to manage its pay-per-click business, Google eliminated a large portion of this. For visibility linked to particular user queries, advertisers only need to log into a dashboard, set their budgets, and place bids against each other. Advertising costs for valuable searches, like those pertaining to legal or financial services, are very high. Because of this, Google is able to make massive profits from regular internet traffic without having to rely on a large number of highly compensated employees.
By the end of the previous year, Alphabet had about 191,000 employees worldwide. But the distribution of those employees is not uniform throughout the company. The majority don't directly work on the main search or advertising processes. Rather, they are concentrated in labor-intensive departments like Google Cloud and departments like other administration and compliance. Only a few engineers are needed to maintain and keep an eye on the fundamental systems and software that drive Google's search engine. By the end of 2025, Alphabet was making more than £2.1 million annually per employee, though the amount from search alone is likely much higherpossibly up to £10 million per employee. Due to its extremely low headcount in relation to sales, Alphabet has a self-sufficient engine that supports the rest of the company, finances its larger goals, and generates enormous profitsroughly £1 billion every two to three days.
Extending into Google Cloud and other areas.
Attending Google Cloud Next 2026 at the Mandalay Bay Convention Center is Anna Namit.
Google Cloud is the segment of the company outside of search that is expanding at the fastest rate. Large corporations and public sector organizations purchase processing power and data storage from this division, which offers a platform for companies to develop, host, and operate their own software programs. In contrast to search engines, the cloud industry requires a worldwide sales force due to its inherent labor-intensive nature. The demand for machine-learning applications drove the unit's revenue to surpass £70 billion by the end of 2025. After years of spending money to construct physical data centers, this division has grown into a very successful business that brings in billions of dollars each quarter. Devices and subscriptions make up Alphabet's third sizable division. This includes upgrades to digital storage via Google One, which combines individual consumer storage for Google Drive, Gmail, and Google Photos, and premium, ad-free access to YouTube. This is different from the corporate cloud in that it concentrates on the hardware used by individual customers, like Pixel smartphones. Globally, there are now more than 325 million subscribers. This division produces over £50 billion a year.
The ease with which Alphabet integrates these disparate companies is what ultimately solidifies its hegemony. For instance, Google Video's early failure was resolved by acquiring YouTube, which was subsequently extensively incorporated into the main search results. Originally designed to meet local search requirements, Google Maps is now directly integrated into the Android operating system and the dashboards of Android Auto cars. This networked web offers integrated, free marketing throughout the whole portfolio, improving user experience while securing customers in Alphabet's systems.
The parent company is able to make investments on a scale that few businesses in history can match thanks to the constant flow of cash. Alphabet functions more like a sizable venture capital fund than it does by giving dividends or repurchasing shares to shareholders. Three tiers comprise its investment strategy. It uses Google Labs, a fast-paced setting where software teams test early features, like enhanced AI systems, directly with the public, for short-term product enhancements. The company concentrates on strategic acquisitions for medium-term time horizons, purchasing external platforms and gradually expanding them. Lastly, X Development (formerly Google X), the "Moonshot Factory" established to support cutting-edge technologies like grid-scale energy storage and self-driving cars, is in charge of the long-term horizon. Alphabet uses these strategies to direct its search, cloud, and subscription revenue toward the development of cutting-edge technology of the future.
The acquisition formula of Alphabet.
Over the years, Alphabet has purchased over 250 technology businesses. Acquiring a promising but financially limited technology and scaling it with the company's engineering know-how and enormous profits has been the formula for every deal. Keyhole, a faltering start-up established in 2001, is where Google Maps got its start. Keyhole created EarthViewer 3D, a 3D digital globe, and even got early support from the Central Intelligence Agency of the United States. The business model was weak, but the technology was impressive. Keyhole sold its software to defense and real estate companies on physical CDs. Google paid about £35 million to acquire Keyhole in 2004 after realizing that about 25% of all online searches were related to location. It rebranded the platform as Google Maps, eliminated the pricey pricing, and added a clearer, easier-to-use interface. In the process, it turned a specialized military-style tool into a free tool that is now practically as recognizable as the search engine.
Google Corp. The YouTube logo of and039 is shown.
Google's 2006 acquisition of YouTube was a result of its own online video failure. Google Video, the company's proprietary platform, was falling behind its quickly expanding competitor. YouTube achieved success by providing an easy-to-use interface that made it possible for anyone to upload and stream videos. But by the summer of 2006, the company was being overtaken by its own success. Its survival was threatened by copyright lawsuits from traditional media companies, and hosting expenses were skyrocketing. Management intervened with a £1.65 billion acquisition after realizing Google Video had lost the fight. Google was able to secure the top online video destination before legacy media companies could shut it down thanks to the takeover, which saved YouTube from likely bankruptcy. By the end of 2025, YouTube was making over £40 billion a year.
Probably the most successful acquisition was the acquisition of Android in 2005. It had been creating an operating system for mobile phones as a start-up, but it lacked the funds to pay for the salaries of its engineers. It was acquired for a mere £50 million and was a small business with eight employees at the time. At the time, this amount was so tiny that the stock market wasn't even informed of it. Preventing competitors from blocking its mobile search engine was the aim of the acquisition. Google quickly gained control over mobile software by making Android free, eventually gaining over 70% of the global smartphone market. Even as smartphone usage surpassed computer usage, this relatively small investment helped ensure that the search business kept expanding.
Alphabet's dominance in AI was cemented in 2014 when it acquired DeepMind. Established in London by Demis Hassabis, Shane Legg, and Mustafa Suleyman, the lab has one of the best machine-learning research teams in the world. DeepMind concentrated on deep reinforcement learning and AI inspired by neuroscience. However, state-of-the-art AI research is very costly, requiring large amounts of computing power and highly compensated engineers while yielding little immediate profit. Raising venture capital took up a large portion of Hassabis's time. The founders agreed to a 400 million sale to Google after realizing that DeepMind needed the backing of a wealthy business. Hassabis would become CEO of the newly renamed Google DeepMind. The agreement gave the research team the resources they needed to pursue fundamental scientific discoveries while keeping them based in London. In the end, this sustained support paid off. Among other things, Hassabis was awarded the Chemistry Nobel Prize for his work on protein folding with DeepMind.
How Alphabet is aiming for the stars.
Alphabet is unique in that it is prepared to make investments in technologies that could take decades to develop. To safeguard capital, every idea is put through a rigorous three-part screening process by the X Development division. Projects must tackle a worldwide issue that affects millions of people, suggest a radical, ground-breaking solution, and entirely rely on untested technology. Incremental improvements are completely disregarded. X is also intended to reward failure in order to promote daring experimentation. Before major resources are wasted, teams are expected to test their ideas rigorously and may even be rewarded for demonstrating that a project is not feasible from a technical or financial standpoint.
The Waymo autonomous vehicle in San Francisco, California.
This tactic has resulted in a trail of abandoned technologies, such as enigmatic, enormous floating barges that were supposed to be upscale, floating marketing showrooms; a method of storing renewable energy by pumping electricity into enormous tanks of chilled liquid and molten salt; and high-altitude, helium-filled balloons that were intended to float in the stratosphere and create a shifting network to beam wireless internet down to isolated rural communities. However, Waymo, the autonomous vehicle division that was founded in 2009, is the jewel in the crown of the moonshots to date. Waymo demonstrates how a company can outlast an industry cycle with a sizable cash cushion. While some automakers pledged to have self-driving fleets by 2018, only to abandon their plans when machine learning proved to be too challenging, Alphabet just continued to raise billions of dollars. The division resolved the main issues by delaying the release of unproven systems.
With about 3,700 cars in operation and 500,000 paid rides each week, Waymo has now reached scale. Its fleets of self-driving cars run robotaxi networks in major American cities like Phoenix, San Francisco, and Los Angeles, finishing passenger trips without the need for human drivers. It is scheduled to launch in London in September of this year. What started out as a very theoretical experiment has developed into a real transportation breakthrough.
Alphabet is also developing worldwide subsea cable infrastructure underwater. As a result of this ongoing project, 60,000 miles of armored cabling have been installed across the oceans thus far. Alphabet switched from renting space on third-party telecommunications networks to owning its own in order to support the expansion of its cloud services and advertising. These subsea lines transport enormous volumes of data at the speed of light across the globe, acting as the internet's plumbing. Because it owns this infrastructure, Alphabet can guarantee that its consumer services have lower latency than those of its rivals.
Is owning Alphabet worthwhile?
It takes a significant investment to convert digital advertising revenue into physical infrastructure. Whether these assets will produce long-term value or just turn into an expensive diversion is the crucial question for investors. It has been a waste of time to wait for a deep-value entry point, but Alphabet's shares rarely appear cheap on any traditional valuation metric. There hasn't really been a bad moment to purchase the company's shares since it went public in 2004.
Not that the stock has increased steadily. Over the years, Alphabet's stock has experienced several notable declines, including a roughly 50% drop during the 2008 financial crisis and multiple declines of 20% to 30%. Because the underlying earnings have been steadily rising, every single decline has turned out to be a fantastic buying opportunity. Its founders are now among the richest people on the planet, having become centi-billionaires as a result of this compounding. Senior executives are not the only ones who benefit from the model. Bonnie Brown, a massage therapist, joined Google part-time in 1999, when the company had just forty employees. Despite receiving stock options, her weekly salary was only £450. After retiring as a multimillionaire five years later, she established her own nonprofit organization. She would now be a billionaire if she had kept her shares.
Even with its enormous market valuation of roughly £4.5 trillion, Alphabet continues to expand at an astounding rate. Asking if a company can make enough operating profit in five years to make its current enterprise value appear cheap is a straightforward heuristic for assessing expanding businesses. In particular, is it possible for its future operating profits to equal a tenth of that valuation? This means that Alphabet should strive for an annual operating profit of about £450 billion. It earned roughly £190 billion last year and is expected to increase at a rate of 20% to 25% annually over the next five years. The company's current growth trajectory makes £450 billion completely achievable at that level of expansion.
Leave a comment on: Alphabet has more to offer investors than just Google search