This Google’s business is valued at double of Netflix and how analysts feel it can ‘AI-proof’ the company’s search business

Investors reportedly value Google parent Alphabet Inc at a staggering $2.3 trillion, recognizing its dominance in internet search and its pioneering role in artificial intelligence. However, according to a report in Bloomberg, analysts at Needham & Co. argue that this massive figure still fails to capture the true worth of YouTube, a subsidiary of Alphabet.
In a recent note, Laura Martin and Dan Medina from Needham estimated YouTube’s standalone value to be at least $455 billion, exceeding Netflix‘s market cap by more than half. Alphabet’s current structure, they argue, doesn’t adequately reflect the value of its diverse businesses, particularly YouTube. They recommend buying Alphabet stock and have set a price target of $210, a 10% increase over its July 5th record close.

YouTube can help protect Google from AI risks to its search business

“There’s hidden value in YouTube that can’t be traded separately,” Martin explained in a separate interview, as per Bloomberg report. “It’s trapped within Google, a conglomerate facing various risks,” she added, citing concerns about AI potentially disrupting search, a threat “unrelated to YouTube.” Needham believes that separating YouTube would benefit investors interested in either its streaming dominance or Alphabet’s role in AI. Even making just 5% of YouTube tradable could raise Alphabet’s stock price by $15 per share, according to their analysis.
Martin argues that conglomerates often struggle to attract investors because some might be interested in specific parts but not the entire company.
Alphabet’s complex structure has been criticized for obscuring the value of its individual businesses. Regulatory threats to break up the company have, in fact, been welcomed by many investors. However, Quincy Krosby, chief global strategist at LPL Financial, suggests that there’s little indication of Alphabet or other tech giants considering such separations anytime soon.
Meanwhile, YouTube’s streaming dominance continues to grow as consumers shift away from traditional cable and broadcast TV. Ad revenue for the platform is projected to reach $37 billion in 2024 and $42 billion in 2025, reflecting a near 17% and 14% increase, respectively.
While AI has been a major driver of Alphabet’s recent stock surge, YouTube’s role within the “subscriptions, platforms and devices” segment is a key growth engine and a rising contributor to overall revenue, as highlighted by Goldman Sachs analysts. They’ve reiterated their buy rating on Alphabet and increased their price target to $211, partly due to their revised, optimistic assumptions about YouTube’s ad revenue growth.
There are additional reasons for Alphabet to hold onto YouTube. Divyaunsh Divatia, an analyst at Janus Henderson Investors, considers YouTube a “key pillar” of Alphabet’s AI strategy. He emphasizes the benefit YouTube derives from being part of the Google Web services ecosystem, while calling for more transparency from Alphabet to allow investors to better assess YouTube’s growth drivers and value.
Beyond YouTube, Needham’s Martin believes there’s value in potentially separating other Alphabet segments, such as its ad tech unit, currently facing a lawsuit from the US Department of Justice. In Martin’s view, “Alphabet is worth more in pieces than it is together.”

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