Meta Platforms vs. Alphabet: Which Digital Ad Behemoth Has an Edge?
Meta Platforms META and Alphabet GOOGL are behemoths of the digital advertising market, generating billions of dollars in revenues. In the first quarter of 2025, Meta Platforms' advertising revenues increased 16.2% year over year to $42.3 billion, driven by a 5% increase in ad impressions and a 10% increase in average ad price. Meanwhile, Alphabet reported revenues of $66.9 billion, up 8.5% year over year, driven by 9.8% growth in Search revenues and 10.3% growth in YouTube ad revenues.
According to eMarketer's latest projection, Meta Platforms and Alphabet are expected to hit revenues of $209.15 billion (Facebook $116.53 billion and Instagram $67.27 billion) and $183.8 billion (Google $189.74 billion and YouTube $19.42 billion), respectively. Higher tariffs are expected to hurt digital ad spending, which is expected to increase at least 1.5% year over year in 2025. Per the latest dentsu Global Ad Spend Forecasts report, global ad spending is expected to grow 4.9% in 2025 to hit $992 billion, while digital ad spend is anticipated to grow 7.9% to $678.7 billion. This bodes well for both Alphabet and Meta Platforms.
However, macroeconomic challenges, including tariffs and increasing regulatory headwinds, are a concern for both. Meta Platforms shares have outperformed Alphabet year to date. While META shares have appreciated 18.8%, Alphabet has dropped 8.5%.
META and GOOGL Stock's Performance
So, META or GOOGL, which has an edge now?
The Case for Meta Platforms Stock
Meta Platforms' focus on improving advertisers' return on ad spending has been a key catalyst. Its proprietary machine learning system, Andromeda, for retrieval in ad recommendation is powered by NVIDIA. AI is helping META become better at targeting and finding the right audience for advertisers.
The launch of the new Generative Ads Recommendation model for ads ranking that is being used in Facebook Reels has increased conversion rates by 5%. Meta Platforms also saw 30% more advertisers using AI creative tools. Improvements in META's recommendation system have led to a 7% increase in time spent on Facebook, a 6% increase on Instagram, and a 35% increase on Threads over the past six months.
Meta Platforms' focus on integrating AI into its platforms — Facebook, WhatsApp, Instagram, Messenger and Threads — is driving user engagement to boost ad revenues. AI is heavily dependent on data, of which META has a trove, driven by its more than 3.43 billion daily users. Meta AI usage continues to increase, with roughly one billion monthly users globally. The company's initiative to add updates that will help Meta AI deliver more personalized and relevant responses is expected to boost engagement.
These factors are expected to drive Meta Platforms' top-line growth. Our model expects META's revenues to grow 11.9% year over year in 2025, with advertising revenues (97.6% of revenues) projected to increase 11.8% year over year.
The Case for Alphabet Stock
Alphabet has been taking up initiatives to improve its market share in Search through AI innovations. The addition of AI mode expands AI Overview's advanced reasoning, thinking and multimodal capabilities. AI Overviews is driving a more than 10% increase in usage of Google for queries that support AI Overviews in Google's biggest markets, like India and the United States. AI Overview is currently used by more than 1.5 billion people monthly. AI mode is now available in the United States.
Circle to Search has been another key catalyst driving user engagement. At the end of the first quarter of 2025, Circle to Search was available on 250 million devices, with usage increasing roughly 40% during the quarter.
These factors are expected to drive Alphabet's top-line growth. Our model expects Alphabet's Google Advertising revenues to increase 6.6% year over year to $282.05 billion, with Search & other growing 8.2% and YouTube Ads growth of 5%.
However, regulatory headwinds like the lawsuit between the Department of Justice (DOJ) and GOOGL over Google Search are a concern. The DOJ argues that Google has inked anticompetitive deals with Apple and other companies for prime placement of its search engine and plans to break up Google to separate products like Chrome, Search, and Android. DOJ's proposal doesn't bode well for Alphabet, given growing competition from AI-powered products like ChatGPT, Grok, DeepSeek, Perplexity and Meta AI.
META's Earnings Estimate Revisions Positive, GOOGL's Steady
The Zacks Consensus Estimate for META's 2025 earnings is pegged at $25.25 per share, up by 7 cents over the past 30 days, indicating a 5.83% increase over fiscal 2024's reported figure.
The consensus mark for Alphabet's 2025 earnings has been steady at $9.51 per share over the past 30 days, suggesting 18.28% growth over 2024.
Both META's and GOOGL's earnings beat the Zacks Consensus Estimate in all the trailing four quarters. Meta Platforms' average surprise of 17.3% is better than Alphabet's surprise of 14.64%, reflecting a good quality of earnings beat on a consistent basis.
Valuation: GOOGL is Cheaper Than META
Both Meta Platforms and Microsoft are overvalued, as suggested by the Value Score of D and C, respectively.
In terms of forward 12-month Price/Sales, Meta Platforms shares are trading at 8.89X, higher than Alphabet's 6.13X.
GOOGL and META Valuation
Conclusion
Both Alphabet and Meta Platforms are expected to benefit from strong digital ad spending despite tariff headwinds. However, Alphabet's growing regulatory concerns, including a probability of a break-up of the company, make the GOOGL stock risky. META's initiatives to boost top-line with plans to add ads in WhatsApp are a key catalyst.
Although both Alphabet and Meta Platforms currently carry a Zacks Rank #3 (Hold) each, we believe META has a slight edge over GOOGL in the near term.
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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