Prediction: Alphabet Will Beat the Market. Here's Why.

It's amazing what a couple of grad students can cook up in their garage. I've been a fan (and heavy user) of Google since the search engine hit the internet in 1997 and a happy shareholder since 2007.

The company now known as Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) entered the stock market a couple of years before that, but I could never seem to stop writing about Google long enough to pick up any shares.

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GOOGL Total Return Level data by YCharts.

Those first few Alphabet shares, bought for a split-adjusted $11.68 per share, have gained 1,320% as of March 27, 2025. The S&P 500 (SNPINDEX: ^GSPC) market index only rose 438% over the same period, with reinvested dividends along the way.

I have no intention of closing this Alphabet position because I expect the stock to continue outperforming the stock market for years to come. Here's why.

Today's market panic is tomorrow's market history footnote

Spoiler alert: I won't talk about financial growth rates, margin targets, or other fiscal details in this overview. My investment thesis for Alphabet isn't about specific numbers because there's no way to predict what will happen over the next couple of decades. That's the timeline here, and I don't mind some bumps in that long road.

Sure, I'll keep an eye on details like Alphabet's revenue growth and free-cash-flow generation, but it will take much more than a temporary dip in these metrics to make me search for that "sell" button. Otherwise, I could have run for the exits during the market meltdown of 2008-2010 or the inflation crisis in 2022. These events brought drastic slowdowns to Alphabet's sales growth and cash flow.

You can see price dips in Alphabet's stock chart if you squint just right at those periods. I mean, the 2022 drop still looks painful on charts drawn in 2025.

It took more than a year to recover from that bump, which dropped Alphabet's stock price as much as 44.3% lower. But future generations will just see another little squiggle on the long-term growth chart, just like the 65.3% price drop you already forgot happened in 2008. If anything, I hope you bought more shares while they were cheap.

Long-term winners must be flexible -- like Alphabet

The whole Alphabet structure is key to the company's long-term survival. As a pure Google organization, the company would confuse everyone from investors and users to rivals and regulators if it strayed too far from its core operations. Online search and advertising still generate plenty of business, but that will surely change at some point. By then, Alphabet will have something else ready to pick up the money-making slack.

Will it be self-driving taxis? Perhaps the medical research division, boosted by the Google segment's advanced artificial intelligence (AI) tools? It could also be drone delivery services or the AI platform itself. And the next long-term business focus could even consist of something I haven't heard of yet, discovered through Alphabet's growth investment and venture-capital teams.

All of these potential game changers run under different business names, tapping the Google card only when the internet focus makes sense. Would you rather order a Waymo ride or a Google Taxi? You see what I mean. The A to Z collection of business ideas not named Google may look silly so far, but some of them will probably become important revenue streams someday.

That's how centennial survivors are made. Remember, IBM made mechanical calculators and time-recording punch-card machines long before it became a computing giant. Nintendo made card decks for nearly a hundred years before shifting to video game consoles. Mobile communications giant Nokia started out as a Finnish paper mill in 1865.

I worked as a systems administrator for five years before landing my first writing gig in 2005. You have to be ready to roll with the punches, and Alphabet is better prepared than most for the next economywide sea change.

Alphabet leads many market changes from the front

This company doesn't just sit around and wait for the world to change, either. Google and Alphabet often play key roles in important market changes.

I'm talking about YouTube videos, Android smartphones, and the Google search engine. But I'm also leaning into newer and fresher achievements, like quantum computing and generative AI. There are probably many more ideas with industry-creating potential going on behind the scenes.

I want to be invested in all of these exciting projects. It's OK that some of them fail. I applaud Alphabet's audacity of trying unconventional ideas until something works out. Great innovation comes with great risks, after all.

Google (and Alphabet) is still "not a conventional company"

Alphabet's investor relations site greets curious investors with co-founder Larry Page's promise that: "Google is not a conventional company. We do not intend to become one."

I sure can't find another technology company that even reminds me of Google, and the Alphabet structure on top of that unique business only adds to my long-term confidence in the stock. It's already one of the largest names on the market, with a $2 trillion market cap, and that's just the start of even greater long-term gains.

As noted earlier, I won't pin any numerical targets on this opportunity apart from the fact that Alphabet looks likely to outperform the broader stock market for the foreseeable future (and then some). Whether you follow my lead or not, that's good enough for me.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anders Bylund has positions in Alphabet and International Business Machines. The Motley Fool has positions in and recommends Alphabet and International Business Machines. The Motley Fool recommends Nintendo. The Motley Fool has a disclosure policy.