Do Google's Antitrust Woes Make Alphabet Stock a Buy, Sell, or Hold?
Shareholders of Google's parent Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) are going through a rough patch. In the past year, Google lost two major antitrust cases aimed at the heart of its business.
Last August, Google's search engine was deemed an illegal monopoly. Then in April, the tech giant suffered another legal defeat in an antitrust case involving its digital advertising business.
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Does this double blow signal it's time for Alphabet shareholders to sell their stock? Perhaps the prudent approach is holding shares and waiting out the storm.
Or considering Alphabet stock is well below the 52-week high of $207.05 reached in February, is now the time to scoop up shares? Evaluating a course of action requires diving into the company in more detail.
A look at Alphabet's antitrust losses
The court rulings against Google understandably raise concerns about the company's future. After all, the search engine brought in $50.7 billion of Alphabet's $90.2 billion in first-quarter revenue through advertising. However, the company plans to appeal the verdicts, so the antitrust cases could play out in court for years.
Additionally, it's insightful to examine a similar situation Microsoft faced when it lost an antitrust lawsuit in 1998 over bundling its Internet Explorer web browser and ubiquitous Windows software. The court ordered the breakup of Microsoft, but the tech titan won its appeal, and the case was settled without a breakup.
So Alphabet's defeat in these antitrust cases doesn't signal a dire situation for the company at this point. That said, rather than the antitrust lawsuits, an arguably bigger challenge to Google's business is the rise of artificial intelligence (AI).
Is AI the real threat to Google?
According to research firm Gartner, search engine usage is set to drop by a massive 25% in 2026 as people favor AI tools instead. These apps include OpenAI's ChatGPT.
Google is racing to stay relevant to consumers with the creation of its own AI capabilities. The company injected AI-generated results in searches, and is experiencing excellent outcomes.
Google's Q1 search revenue rose from $46.2 billion in 2024 to $50.7 billion this year. Its new AI Overview is used by over 1.5 billion people per month, and Google is generating revenue at the same rate as before the introduction of its AI features.
AI is a key component in many areas of Alphabet's company. For example, its Waymo autonomous car business relies on AI to make driving decisions. Waymo serviced 4 million passenger trips in 2024, and at the end of Q1, weekly paid passenger rides were up fivefold from the prior year. Waymo is expanding into new markets in 2025, demonstrating the success of Alphabet's AI under the demanding conditions of vehicle driving.
Artificial intelligence is so important to Alphabet's future, the company is investing heavily in its AI infrastructure. Last year it spent $52.5 billion in capital expenditures, and it's spending even more in 2025, upping the investment to $75 billion.
The company can do this because of its hefty free cash flow (FCF). In Q1, Alphabet produced $19 billion in FCF.
What to do with Alphabet stock
After unpacking Google's situation post-antitrust verdicts, selling Alphabet shares seems a hasty move right now. The court cases are likely to drag on for some time as Alphabet appeals.
So any impact to its business could be years away, or even minimal, if Alphabet wins an appeal as Microsoft did. Therefore, if you're a shareholder, hang on to Alphabet stock.
But what about investing in Alphabet? Its stock price dropped over recent weeks due to a stock market crash, which hit after President Donald Trump unveiled his "Liberation Day" tariff plans on April 2, and the second antitrust ruling, announced April 17. These factors contributed to Alphabet stock's price-to-earnings (P/E) ratio falling to its lowest level in a year.
Data by YCharts.
Consequently, Alphabet's P/E multiple is the lowest among its top competitors in the digital advertising space, meaning its stock is the best value. Facebook parent Meta Platforms is second only to Google in the digital ad industry, while Amazon is in third place.
Google's ability to increase revenue, and successfully incorporate AI, coupled with Alphabet's attractive P/E ratio, makes its stock a worthwhile long-term investment. So if you own shares, consider adding to your position. If you don't have Alphabet stock, now is a good time to buy.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Robert Izquierdo has positions in Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, and Microsoft. The Motley Fool recommends Gartner and 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.
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In many cases, you can identify forward-looking statements by terms such as 'may,' 'will,' 'should,' 'expects,' 'plans,' 'anticipates,' 'outlook,' 'believes,' 'intends,' 'estimates,' 'predicts,' 'potential' or the negative of these terms or other comparable terminology. These forward-looking statements also include the Company's guidance and outlook statements. These statements are based on management's current expectations but they involve a number of risks and uncertainties. Actual results and the timing of events could differ materially from those anticipated in the forward-looking statements as a result of risks and uncertainties, which include, without limitation: the Company's ability to maintain the value and reputation of its brand; its highly competitive market and increasing competition; its ability to anticipate consumer preferences and successfully develop and introduce new, innovative and differentiated products; the acceptability of its products to guests; increasing costs and decreasing selling prices; its ability to accurately forecast guest demand for its products; its ability to expand in light of its limited operating experience and limited brand recognition in new international markets and new product categories; its ability to manage its growth and the increased complexity of its business effectively; changes in consumer shopping preferences and shifts in distribution channels; its leasing of retail and distribution space; its ability to attract, manage, and retain highly qualified individuals; seasonality; its ability to safeguard against security breaches with respect to its technology systems; its compliance with privacy and data protection laws; any material disruption of its information systems; its ability to have technology-based systems function effectively and grow its e-commerce business globally; disruptions of its supply chain; its reliance on a relatively small number of vendors to supply and manufacture a significant portion of its products; suppliers or manufacturers not complying with its Vendor Code of Ethics or applicable laws; fluctuating costs of raw materials; its ability to deliver its products to the market and to meet guest expectations if it has problems with its distribution system; increasing labor costs and other factors associated with the production of its products in South Asia and South East Asia; an economic recession, depression, or downturn or economic uncertainty in its key markets; global economic and political conditions; its ability to source and sell its merchandise profitably or at all if new trade restrictions are imposed or existing trade restrictions become more burdensome; changes in tax laws or unanticipated tax liabilities; its ability to comply with trade and other regulations; fluctuations in foreign currency exchange rates; global or regional health events such as the COVID-19 pandemic and related government, private sector, and individual consumer responsive actions; imitation by its competitors; its ability to protect its intellectual property rights; conflicting trademarks and patents and the prevention of sale of certain products; climate change and related pressures; heightened scrutiny and legal risks from competing pressures regarding ESG; its exposure to various types of litigation; and other risks and uncertainties set out in filings made from time to time with the United States Securities and Exchange Commission and available at Article content Article content , including, without limitation, its most recent reports on Form 10-K and Form 10-Q. You are urged to consider these factors carefully in evaluating the forward-looking statements contained herein and are cautioned not to place undue reliance on such forward-looking statements, which are qualified in their entirety by these cautionary statements. The forward-looking statements made herein speak only as of the date of this press release and the Company undertakes no obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances, except as may be required by law. Article content lululemon athletica inc. The fiscal year ending February 1, 2026 is referred to as '2025' and the fiscal year ended February 2, 2025 is referred to as '2024'. Condensed Consolidated Statements of Operations Unaudited; Expressed in thousands, except per share amounts First Quarter 2025 2024 Net revenue $ 2,370,660 $ 2,208,891 Costs of goods sold 987,534 933,823 Gross profit 1,383,126 1,275,068 As a percentage of net revenue 58.3 % 57.7 % Selling, general and administrative expenses 942,871 842,426 As a percentage of net revenue 39.8 % 38.1 % Amortization of intangible assets 1,630 — Income from operations 438,625 432,642 As a percentage of net revenue 18.5 % 19.6 % Other income (expense), net 11,786 23,283 Income before income tax expense 450,411 455,925 Income tax expense 135,839 134,504 Net income $ 314,572 $ 321,421 Basic earnings per share $ 2.61 $ 2.55 Diluted earnings per share $ 2.60 $ 2.54 Basic weighted-average shares outstanding 120,632 125,989 Diluted weighted-average shares outstanding 120,843 126,336 Article content lululemon athletica inc. Condensed Consolidated Balance Sheets Unaudited; Expressed in thousands May 4, 2025 February 2, 2025 April 28, 2024 ASSETS Current assets Cash and cash equivalents $ 1,325,272 $ 1,984,336 $ 1,900,672 Inventories 1,652,091 1,442,081 1,345,267 Prepaid and receivable income taxes 230,280 182,253 192,955 Other current assets 374,874 371,632 329,193 Total current assets 3,582,517 3,980,302 3,768,087 Property and equipment, net 1,846,609 1,780,617 1,561,185 Right-of-use lease assets 1,549,401 1,416,256 1,263,749 Goodwill and intangible assets, net 178,001 171,191 23,992 Deferred income taxes and other non-current assets 274,015 254,926 211,482 Total assets $ 7,430,543 $ 7,603,292 $ 6,828,495 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 303,975 $ 271,406 $ 261,605 Accrued liabilities and other 506,996 559,463 374,446 Accrued compensation and related expenses 144,222 204,543 132,911 Current lease liabilities 281,837 275,154 254,443 Current income taxes payable 31,276 183,126 53,087 Unredeemed gift card liability 271,076 308,352 268,296 Other current liabilities 33,003 37,586 38,783 Total current liabilities 1,572,385 1,839,630 1,383,571 Non-current lease liabilities 1,424,945 1,300,637 1,147,631 Non-current income taxes payable — — 15,864 Deferred income tax liability 98,189 98,188 29,150 Other non-current liabilities 45,454 40,790 32,471 Stockholders' equity 4,289,570 4,324,047 4,219,808 Total liabilities and stockholders' equity $ 7,430,543 $ 7,603,292 $ 6,828,495 Article content lululemon athletica inc. Condensed Consolidated Statements of Cash Flows Unaudited; Expressed in thousands First Quarter 2025 2024 Cash flows from operating activities Net income $ 314,572 $ 321,421 Adjustments to reconcile net income to net cash provided by operating activities (433,526 ) (193,897 ) Net cash (used in) provided by operating activities (118,954 ) 127,524 Net cash used in investing activities (106,842 ) (131,537 ) Net cash used in financing activities (467,974 ) (328,628 ) Effect of foreign currency exchange rate changes on cash and cash equivalents 34,706 (10,658 ) Decrease in cash and cash equivalents (659,064 ) (343,299 ) Cash and cash equivalents, beginning of period 1,984,336 2,243,971 Cash and cash equivalents, end of period $ 1,325,272 $ 1,900,672 Article content lululemon athletica inc. Reconciliation of Non-GAAP Financial Measures Unaudited Constant dollar changes The below changes show the change compared to the corresponding period in the prior year. Due to the 53rd week in 2024, the below changes in comparable sales are calculated on a one week shifted basis such that the 13 weeks ended May 4, 2025 is compared to the 13 weeks ended May 5, 2024 rather than April 28, 2024. First Quarter 2025 Net Revenue Change Foreign exchange Change in constant dollars United States 2 % — % 2 % Canada 4 5 9 Mexico (1) n/a n/a n/a Americas 3 1 4 China Mainland 21 1 22 Rest of World 16 1 17 Total international 19 1 20 Total 7 % 1 % 8 % Article content First Quarter 2025 Comparable Sales (2) Change Foreign exchange Change in constant dollars Americas (2 )% 1 % (1 )% China Mainland 7 1 8 Rest of World 6 1 7 Total international 6 1 7 Total 1 % — % 1 % Article content ___________________ (1) On September 10, 2024, the Company acquired the lululemon branded retail locations and operations run by a third party in Mexico. Wholesale sales to the third party by lululemon athletica canada inc. prior to the acquisition are disclosed as net revenue recognized within Canada. (2) Comparable sales includes comparable company-operated store and e-commerce net revenue. Comparable company-operated stores have been open for at least 12 full fiscal months, or open for at least 12 full fiscal months after being significantly expanded. Comparable company-operated stores exclude stores which have been temporarily relocated for renovations or have been temporarily closed. Company-operated stores acquired as a result of the acquisition of the Mexico operations will be considered comparable beginning October 2025, after 12 full fiscal months of sales from the date of acquisition. Article content Total Gross Square Feet at the Beginning of the Quarter Gross Square Feet Added During the Quarter (2) Gross Square Feet Lost During the Quarter (2) Total Gross Square Feet at the End of the Quarter 2 nd Quarter 2024 2,988 90 3 3,075 3 rd Quarter 2024 3,075 156 — 3,231 4 th Quarter 2024 3,231 153 12 3,372 1 st Quarter 2025 3,372 50 7 3,415 Article content Article content Article content Article content Contacts Article content Investor Contacts: Article content lululemon athletica inc. Article content Article content Howard Tubin Article content Article content 1-604-732-6124 Article content Article content or Article content Article content ICR, Inc. Article content Article content Joseph Teklits Article content Article content 1-203-682-8200 Article content Article content Article content
