Alphabet vs. The Trade Desk: Which is a better buy?

Key Points

Alphabet has shown accelerating top-line growth even in a challenging macroeconomic environment. The Trade Desk, on the other hand, issued disappointing guidance for the current quarter as its top-line momentum continues to slow down. Among these two stocks, one stands out as the clear winner in a head-to-head comparison.

For investors looking to gain exposure to growth trends in their portfolios, one idea is to invest in companies that are tied to not just one, but two major growth areas of the market: artificial intelligence (AI) and digital advertising. Alphabet, the online search giant, and The Trade Desk, an independent digital advertising platform, are two such companies. However, recent earnings reports from these two firms have revealed a stark contrast in their fundamental momentum. Alphabet continues to accelerate its top line and expand its profit margins, while The Trade Desk's stock has been under pressure this year due to a further slowdown in its top-line growth.

This raises the question: Is now a good time for investors to pick up shares of the smaller digital advertising specialist, given its recent stock price decline? Or is Alphabet, despite its large size and better stock performance, still the better investment choice?

Alphabet Pairs Rapid Growth with Diverse Revenue Streams

Alphabet’s fourth-quarter financial results were impressive. Revenue increased by 18% year over year to $113.8 billion, marking an acceleration from the 16% growth seen in the previous quarter. This growth was driven by strength across multiple segments, including Google Services revenue, which encompasses Google Search, subscriptions, and YouTube ads, as well as its booming cloud computing business.

Google Cloud, in particular, saw a staggering 48% year-over-year revenue increase to $17.7 billion during the period. This high-margin segment is benefiting from the ongoing adoption of AI infrastructure.

“We’re seeing our AI investments and infrastructure drive revenue and growth across the board,” said Alphabet CEO Sundar Pichai in the company's fourth-quarter earnings release.

Alphabet also demonstrated strong operating leverage. While sales grew by 18%, net income surged by 30% year over year to $34.5 billion. This improvement reflects the company’s focus on cost discipline, even as it funds significant infrastructure investments.

The Trade Desk Faces Decelerating Momentum

The situation looks much different for The Trade Desk. The company reported revenue of $847 million during the period, up 14% year over year. However, management noted that growth would have been closer to 19% if not for the irregular nature of U.S. political ad spending. Despite this, the trajectory is still slowing compared to previous quarters.

Looking ahead, the outlook is expected to worsen. Guidance for first-quarter revenue of at least $678 million implies about 10% year-over-year growth, a significant step down from the growth seen in the fourth quarter. Additionally, management's adjusted EBITDA guidance suggests a year-over-year decrease in the key profitability metric.

Despite these challenges, The Trade Desk continues to generate substantial free cash flow and maintains a debt-free balance sheet. Its latest platform, Kokai, is heavily infused with AI, and CEO Jeff Green described it as "the most advanced AI-fueled buying platform ever pointed at the open internet."

However, the company's top-line deceleration remains a concern.

The Winner is Clear

Overall, I believe Alphabet is the better of the two stocks. The Trade Desk trades at about 27 times earnings at the time of this writing, while Alphabet, despite growing faster and having a more diversified business, is trading at almost the same valuation, with a price-to-earnings ratio of just 28.

Alphabet benefits from a highly diverse business model and a cloud computing segment experiencing surging growth. Therefore, it is the clear winner in the debate between these two tech stocks.

Should You Buy Stock in Alphabet Right Now?

Before making any investment decisions, consider the following:

The Motley Fool Stock Advisor analyst team recently identified what they believe are the 10 best stocks for investors to buy now — and Alphabet wasn’t one of them. The 10 stocks that made the cut could produce significant returns in the coming years.

For example, consider when Netflix made this list on December 17, 2004. If you invested $1,000 at the time of the recommendation, you would have $519,015 today. Similarly, when Nvidia made the list on April 15, 2005, a $1,000 investment would have grown to $1,086,211.

Stock Advisor’s total average return is 941% — a market-crushing outperformance compared to 194% for the S&P 500.

Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors.

See the 10 stocks »

Stock Advisor returns as of March 2, 2026.
Daniel Sparks and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and The Trade Desk. The Motley Fool has a disclosure policy.