Meta Platforms (META) has emerged as a tech powerhouse over the last decade, thanks to its dominance in social media and digital advertising. With its apps—Facebook, Instagram, Messenger, and WhatsApp—Meta has seen its stock soar by nearly 660% in the past 10 years. This growth is fueled by its innovative ad solutions and unmatched user base, making it a leader in digital advertising alongside Alphabet (Google).
Alphabet, on the other hand, has achieved over 500% stock growth during the same period, driven by its flagship services like Google Search, YouTube, and Google Cloud. However, challenges such as antitrust scrutiny, competition from generative AI, and underperformance in social media weigh heavily on its future prospects.
With Meta currently valued at $1.4 trillion and Alphabet at $2 trillion, the question arises: Could Meta surpass Alphabet’s valuation by 2025? Let’s explore these tech giants’ growth trajectories, challenges, and opportunities.
Meta vs. Alphabet: Revenue Growth Comparison
Meta and Alphabet both derive most of their revenue from digital advertising, but Meta has been growing slightly faster. From 2018 to 2023, Meta’s revenue grew at a compound annual growth rate (CAGR) of 19%, compared to Alphabet’s CAGR of 18%.
Both companies experienced setbacks during the pandemic in 2020 as advertisers cut spending. Alphabet partially offset these challenges with the growth of Google Cloud, while Meta faced more significant hurdles. However, both companies rebounded strongly in 2021 as economic conditions improved.
In 2022, Meta faced additional headwinds due to Apple’s iOS privacy changes, which disrupted its ad targeting capabilities. Competition from TikTok further compounded Meta’s challenges. Meanwhile, Alphabet dealt with slowing YouTube growth and macroeconomic pressures on its advertising business.
By 2023, Meta regained momentum through AI-powered data solutions, expansion of Reels, and a surge in ad spending from Chinese businesses. Conversely, Alphabet’s growth decelerated as its core advertising business and YouTube faced mounting competitive and economic pressures.
Meta’s Tailwinds vs. Alphabet’s Headwinds
From 2023 to 2026, analysts expect Meta’s revenue to grow at a CAGR of 16% and its earnings per share (EPS) at 25% annually. This growth will be driven by:
- Continued expansion of Meta’s apps, which reached 3.29 billion daily active users in the last quarter.
- Development of Reality Labs’ AR/VR products, offering new monetization opportunities.
- Potential TikTok restrictions in the U.S., which could boost user engagement on Reels.
Although Meta faces regulatory scrutiny, such as the FTC lawsuit targeting Instagram and WhatsApp acquisitions, these pressures are not as immediate as Alphabet’s regulatory battles.
Alphabet, meanwhile, is forecasted to grow its revenue at a CAGR of 12% and EPS at 21% annually through 2026. While Alphabet benefits from its diversified ecosystem of services, it faces significant challenges:
- Antitrust lawsuits, including the DOJ’s push to force Google to divest Chrome.
- Potential disruption of its search dominance by generative AI technologies like OpenAI’s ChatGPT.
- Slower growth in YouTube and tougher competition in the cloud market.
Valuation Trends: Can Meta Close the Gap?
Currently, Alphabet trades at 19 times forward earnings, making it the cheapest of the Magnificent Seven tech stocks. Meta follows closely with a forward multiple of 22. Assuming both companies meet Wall Street’s growth expectations and maintain similar valuations, Alphabet’s market cap could rise to $2.4 trillion by the end of 2025, while Meta could grow to $1.6 trillion.
If forward multiples increase to 20 times earnings for both companies, Alphabet’s valuation would reach $2.6 trillion, still outpacing Meta at $1.4 trillion. This suggests that unless Alphabet’s growth significantly falters, Meta is unlikely to surpass Alphabet in market cap within the next two years.
Meta’s Long-Term Advantage Over Alphabet
While Alphabet is expected to retain a higher valuation, Meta’s faster growth rate and fewer immediate regulatory headwinds make it an attractive long-term investment. Meta continues to innovate with AR/VR technologies, AI-driven advertising solutions, and tools to compete effectively with TikTok.
Alphabet’s reliance on advertising and its vulnerability to antitrust actions could limit its upside potential. The rise of AI-powered search engines also poses a long-term risk to its core search business.
Which Stock Is the Better Bet?
Although Meta is unlikely to surpass Alphabet in valuation by 2025, its rapid growth trajectory and diversified innovation pipeline position it as a strong contender for long-term success. Alphabet remains a tech giant with unparalleled assets, but regulatory hurdles and market challenges create uncertainties.
For investors, both Meta and Alphabet represent solid opportunities within the tech sector. Meta’s growth potential and evolving technologies could yield higher returns over time, while Alphabet offers stability and value at a competitive price. Whether you prefer Meta’s agility or Alphabet’s dominance, both stocks can play a role in a balanced portfolio targeting future tech growth.
Reference : Katie Brockman