DCF Valuation Analysis of Google (Jun 2025)

An interactive 10-year DCF of Alphabet implying ~$132/share (vs. $173 market price, ~31% overvalued) driven by terminal-value dominance, alongside peer P/E and EV/EBITDA multiples showing GOOGL as the cheapest of the major tech peers.

Overview

An interactive 10-year DCF valuation of Alphabet Inc. (GOOGL), with live sliders for WACC and terminal growth rate that recalculate the implied share price in real time, plus historical financial trends and peer-relative multiples (P/E, EV/EBITDA).

Valuation Snapshot

Current Market Price: $173.42 (as of May 28, 2025)
Model's Base-Case Implied Price: $132.37 (WACC 9.86%, terminal growth 2.50%)
Conclusion: Potentially Overvalued by ~31%

Company Profile

Alphabet's three business pillars (Q1 2025 YoY revenue growth):

Google Services (+9.75%) — the core revenue driver: Search, YouTube, Android, Chrome, Hardware; dominant in advertising.
Google Cloud (+28.06%) — enterprise cloud (GCP) and Workspace; now consistently profitable and the key growth engine.
Other Bets (-9.09%) — long-term, high-risk/high-reward ventures (e.g., Verily healthcare, autonomous driving).

Historical Performance (2020 → TTM Q1 2025)

Metric	2020	2024	TTM Q1 2025
Total Revenue	$182.53B	$350.02B	$359.70B
Net Income	$40.27B	$100.12B	$107.03B
Free Cash Flow	$42.84B	$72.76B	$74.88B

DCF Model Mechanics

Base-case build: PV of 10-year FCFs ( $616.74B) + PV of Terminal Value ($ 925.85B) = Enterprise Value ( $1,542.59B) + Net Cash ($ 84.44B) = Equity Value ( $1,627.03B) → Implied Price ($ 132.37/share, ÷12,291.81M shares outstanding).

Sensitivity (implied price varies with WACC 8.86%-10.86% and terminal growth 2.00%-3.00%): a lower WACC and higher terminal growth rate both push the implied price up; the model is more sensitive to WACC than to growth rate within these ranges, consistent with the terminal value dominating the total valuation (~60% of enterprise value here).

Relative Valuation vs. Peers

Company	P/E (TTM)	EV/EBITDA (TTM)
Alphabet	19.3	13.7
Apple	29	21.8
Meta	29	18.3
Amazon	65	17.3
Microsoft	33.7	24.6

Alphabet trades at the lowest multiples of the five major tech peers on both metrics — a discount that can be read either as a value opportunity or as the market pricing in relatively lower conviction in its AI monetization path versus Microsoft.

Key Takeaways

The DCF (implying ~$132) and the peer-multiple comparison (Alphabet cheapest among peers) point in different directions at first glance — the DCF says overvalued in absolute terms, while the relative comparison says undervalued versus peers — which is the article's implicit lesson that intrinsic and relative valuation answer different questions and can disagree simultaneously.
Terminal value dominance is the single biggest driver of the ~31% overvaluation conclusion: since PV of Terminal Value ( $925.85B) is roughly 60% of enterprise value, the entire investment thesis rests more on assumptions about Alphabet's business a decade from now than on its current$ 74.88B TTM free cash flow.
Alphabet's lowest-of-peer-group multiples (19.3x P/E, 13.7x EV/EBITDA vs. Microsoft's 33.7x/24.6x) is presented as market skepticism about Google's AI monetization path relative to Microsoft's more direct enterprise AI story — the same "AI premium" concept flagged in the MSFT valuation article, just absent here rather than present.