Alphabet Stock Will Crush Palantir Stock Over the Next 5 Years
Both Palantir Technologies(NASDAQ: PLTR) and Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) are great technology companies with impressive business momentum. But they have some key differences, especially when it comes to growth rates and valuation.
On one side, you have Palantir — an artificial intelligence (AI) data and analytics software provider that is putting up staggering revenue growth rates, but its stock is trading at a valuation that is simply difficult for many investors to wrap their heads around. Then you have Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) — a foundational tech giant growing at a more measured (but still impressive) pace, backed by a highly diversified business and a deeply entrenched operating history. And Alphabet stock’s valuation? Far more conservative.
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Both companies are proving that there are real AI tailwinds helping drive their growth. But just one of the two stocks looks like a buy today — and the comparison arguably isn’t even close.
So, when looking out over the next five years, which stock is the better buy today?
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There is no denying that Palantir is executing flawlessly right now. The data analytics company recently reported fourth-quarter 2025 revenue of roughly $1.41 billion — a blistering 70% year-over-year increase. And that growth is not just coming from its legacy government contracts. U.S. commercial revenue surged 137% in Q4 to $507 million, underscoring the rapid acceleration of enterprise demand for its platforms.
And Palantir’s underlying financial health is equally impressive. The company reported $609 million in net income under generally accepted accounting principles (GAAP) in the fourth quarter. Showing how big this profit is, this puts net income at about 43% of the quarter’s revenue.
Additionally, management’s forward-looking commentary was upbeat. Management guided 2026 full-year revenue of roughly $7.19 billion at the midpoint, implying a 61% year-over-year increase.
But separating a phenomenal business from its stock is critical here.
Palantir shares currently trade at a forward price-to-earnings multiple of about 125. And its standard price-to-earnings ratio, which is based on the company’s trailing-12-months earnings? It’s hovering near 240 as of this writing.
That valuation leaves virtually no room for disappointment. The current price already assumes the company will maintain its hyper-growth trajectory and grow earnings dramatically in the years ahead. If commercial demand softens or sales cycles lengthen, the stock’s valuation could contract sharply, even if the underlying business remains strong.
Alphabet may not be growing as fast as Palantir on a percentage basis, but its growth story is arguably more robust given its massive scale. In Q4, the Google parent company’s total revenue rose 18% year over year to $113.8 billion, pushing full-year revenue past the $400 billion mark for the first time in the company’s operating history.
The real story, however, is Google Cloud. Alphabet’s cloud computing revenue jumped 48% year over year to $17.7 billion in Q4, driven by heavy enterprise demand for its AI infrastructure.
Importantly, this growth is highly profitable, with cloud operating income more than doubling year over year to $5.3 billion.
Even more, there’s plenty of cloud growth ahead for Alphabet. Google Cloud ended 2025 with a staggering $240 billion revenue backlog — up 55% sequentially. That figure provides Alphabet with unique, multi-year visibility into its most important business catalyst.
Then there are the company’s emerging bets.
While Search and Cloud pay the bills, Alphabet holds assets that may be small today but could be big tomorrow — assets like its Waymo autonomous driving unit and its long-standing investment in SpaceX, which could serve as substantial catalysts over the long haul. These moonshots offer long-term optionality and enhance the stock’s long-term potential.
And unlike Palantir, Alphabet shares trade at a very reasonable 28 times trailing earnings. You could say that the market may be effectively pricing Alphabet as a mature tech giant while somewhat ignoring the acceleration in its cloud business and the sheer scale of its future AI monetization.
When comparing the two tech stocks, Alphabet is arguably the clear winner.
Palantir is a fantastic company with incredible momentum, but its stock is priced for absolute perfection. With Alphabet, however, investors get a diversified, cash-generating core business, a rapidly accelerating cloud segment with a massive backlog, and unique exposure to next-generation technologies like autonomous driving and space exploration — all at a sensible valuation.
Of course, buying Alphabet is not without risk. Management anticipates 2026 capital expenditures will land between $175 billion and $185 billion as the company races to secure AI compute capacity. If that massive infrastructure spend fails to deliver attractive long-term returns, the stock could easily come under pressure. But trading at about 28 times earnings, the market’s expectations are arguably low enough to make that a risk worth taking.
I could be wrong, but over the long haul, I think Alphabet stock’s returns will crush Palantir’s.
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Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Palantir Technologies. The Motley Fool has a disclosure policy.
