Will Amazon Be Worth More Than Alphabet by 2025?

Ten years ago, Amazon (AMZN 0.33%) was worth $140 billion. Alphabet (GOOG 0.61%) (GOOGL 0.65%), the parent company of Google, was more than twice as valuable, with a market cap of $355 billion.

Both of these tech stocks soared over the past decade. Amazon’s stock rallied 1,140% and boosted its market cap to $1.98 trillion. Alphabet’s stock advanced 525% and drove its market cap to $2.02 trillion. Let’s look back and see how Amazon caught up to Alphabet — and if it can pull ahead and become the more valuable “Magnificent Seven” stock by 2025.

Image source: Getty Images.

Which company is growing faster?

From 2013 to 2023, Amazon’s revenue grew at a compound annual growth rate (CAGR) of 23% as its net income increased at a CAGR of 60%. That rapid expansion was driven by the robust growth of its e-commerce marketplaces, the stickiness of its Prime memberships, and its rising operating profits at Amazon Web Services (AWS) — which became the world’s largest cloud infrastructure platform.

Amazon’s growth accelerated significantly in 2020 as the pandemic drove more people to shop online and more companies to expand cloud-based services. Amazon’s growth decelerated as it lapped that temporary growth spurt. Both of those businesses cooled in 2022 and 2023 as inflation and other macro headwinds curbed consumer spending and drove many companies to rein in cloud expenses.

From 2023 to 2026, analysts expect Amazon’s revenue and net income to grow at CAGRs of 11% and 38%, respectively. The company’s e-commerce growth could slow as it faces tougher competition from aggressive cross-border discount marketplaces like Shein and PDD‘s Temu, but it could offset that pressure by expanding higher-margin AWS and advertising businesses. Amazon expects the rapid growth of the artificial intelligence (AI) market to drive more companies to expand its cloud infrastructure, while more businesses could buy ads directly on Amazon instead of using traditional ad platforms like Google.

From 2013 to 2023, Alphabet’s revenue and net income both increased at a CAGR of 19%. That growth was fueled by its steady sales of display and search ads, YouTube’s rising popularity, and the expansion of the Google Cloud platform. It also locked in its users with more subscription services and sold more hardware devices.

Alphabet’s core advertising business cooled in 2020 as the pandemic forced many companies to reduce marketing expenses, but it offset that pressure by growing its cloud business. The company’s advertising and cloud segments both grew in 2021, but that recovery ended in 2022 as the macro environment worsened. Alphabet’s growth accelerated again in 2023 as its ad businesses stabilized, it grew its subscription platforms, and the AI market’s expansion generated tailwinds for its cloud business.

From 2023 to 2026, analysts expect Alphabet’s revenue to grow at a CAGR of 12% as its net income rises at a CAGR of 18%. That outlook seems stable, but Alphabet faces two unpredictable threats.

First, new generative AI search engines like OpenAI’s SearchGPT could disrupt Google’s core search engine. Second, the U.S. Department of Justice (DOJ) could force Google to split itself up or spin off some of its assets after its recent antitrust ruling against the company.

Which tech giant will be worth more by the end of 2025?

Amazon’s stock trades at 33 times next year’s earnings, while Alphabet has a much lower forward multiple of 19. Amazon’s higher valuation reflects the market’s enthusiasm for the stabilization of its e-commerce business and AWS’ growth potential in the booming AI industry, while Alphabet’s lower valuation reflects all the near-term uncertainties regarding its generative AI competitors and antitrust threats.

Assuming both companies match analysts’ expectations and continue to trade at the same forward valuations at the end of 2025, Amazon’s stock could rise 26% to $239 and boost its market capitalization to $2.5 trillion. Alphabet’s stock could climb 16% to $190 and lift its market cap to just over $2.3 trillion.

In other words, Amazon has a clear shot at eclipsing Alphabet’s market cap by next year if the near-term challenges continue to compress Alphabet’s valuations. I don’t think Alphabet can fully resolve those pressing issues over the next 12 months — so it will likely underperform Amazon until it convinces the market it deserves a higher valuation.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Leo Sun has positions in Amazon. The Motley Fool has positions in and recommends Alphabet and Amazon. The Motley Fool has a disclosure policy.