Alphabet owns Google Search, YouTube, Android and Google Cloud, which grew 82% last quarter. It is spending about $200 billion this year on AI data centers and has started selling new shares to help pay for it. It also owns stakes in SpaceX and Anthropic worth more than $200 billion.
The cash-flow model’s bear-to-bull range, the probability-weighted value, the price, its 52-week range and the analysts’ average target. The copper line marks the base case; the fine dotted line is today’s close.
Written on October 22, 2026, ahead of its third-quarter results on October 28. Figures are from the company’s filings and releases unless noted. Not investment advice. The author holds no Alphabet shares directly.
Google Services (79% of last quarter’s revenue) is Search, YouTube, Android, Chrome and subscriptions such as YouTube Premium and Google One. Google Cloud (21%) rents computing, including Google’s own TPU AI chips, and sells Workspace and the Gemini models to businesses. Other Bets includes Waymo.
Search still produces most of the profit. The AI question for Alphabet runs both ways: Gemini and AI Overviews have to keep Search growing while chatbots compete for the same questions, and Cloud has become one of the main ways AI labs rent computing.
Second-quarter revenue rose 24% to $119.8 billion and operating income 30% to $40.8 billion. Search grew 17%, YouTube ads 13% and Cloud 82%, with Cloud’s operating income tripling to $8.8 billion. Net income of $112.1 billion included about $98 billion of unrealized gains on the SpaceX and Anthropic stakes.
Capital spending was $44.9 billion in the quarter and free cash flow turned negative for the first time. Alphabet raised 2026 capex guidance to $195–205 billion, sold $49.6 billion of new shares in June, issued $20.3 billion of bonds and plans a $40 billion at-the-market share program. The shares fell 7% the next day. Third-quarter results come on October 28.
| FY2021 | FY2022 | FY2023 | FY2024 | FY2025 | TTM Jun 2026 | |
|---|---|---|---|---|---|---|
| Revenue | $257.6B | $282.8B | $307.4B | $350.0B | $402.8B | $445.9B |
| Operating margin | 30.6% | 26.5% | 27.4% | 32.1% | 32.0% | 33.1% |
| Net income | $76.0B | $60.0B | $73.8B | $100.1B | $132.2B | $244.2B |
| Operating cash flow | $91.7B | $91.5B | $101.7B | $125.3B | $164.7B | $185.7B |
| Capital spending | $24.6B | $31.5B | $32.3B | $52.5B | $91.4B | $132.4B |
| Free cash flow | $67.0B | $60.0B | $69.5B | $72.8B | $73.3B | $53.3B |
Revenue grew 42% between 2022 and 2025 and capital spending almost tripled. The last twelve months’ net income of about $244 billion is inflated by gains on investments; operating income of $148 billion is the better guide. The quarterly view shows each quarter.
Alphabet’s June share sale and bond issue mark a turn for a company that had bought back stock for years. This model counts net cash of about $100 billion (an estimate after the new funding) plus the stakes disclosed in its June 10-Q: about 6% of SpaceX, worth $94.1 billion, and about 14% of Anthropic, about $124 billion. The stakes alone add about $18 a share, and about $26 with net cash. Most of the SpaceX stake cannot be sold until lock-ups end.
The at-the-market program will add shares; the model uses about 12.25 billion, a little above today’s count. Larry Page and Sergey Brin control the vote through Class B shares.
| Assumption | Base case | Basis |
|---|---|---|
| Revenue, 2026 | $490B | Estimate: first half plus a second half growing as in Q2 |
| Growth, 2027 and 2028 | 15%, then 13% | Cloud fast, Search low teens; fades to 3% by year 10 |
| Operating margin | 34% rising to 35% | Q2 was 34%; depreciation rises with capex |
| Net investment, 2027–2030 | $150B, $120B, $90B, $60B | Capex less depreciation; then $1 per $2 of new revenue |
| Discount rate | 10.1% | Beta 1.13, little net debt |
| Terminal growth | 3.0% | With a 25% return on new capital |
| Bear | Base | Bull | |
|---|---|---|---|
| Growth, 2027 / 2028 | 9% / 7% | 15% / 13% | 19% / 17% |
| Long-run operating margin | 30% | 35% | 38% |
| Net investment, first year | $180B | $150B | $130B |
| Discount rate | 11.1% | 10.1% | 9.1% |
| Value per share | $139 | $249 | $380 |
| Probability | 25% | 50% | 25% |
Weighted 25/50/25: $254. The bear case is AI chatbots taking search share while the capex keeps rising; the bull case is Cloud and Gemini turning the spending into a second Search-sized business.
| Discount rate | 8.5% | 9.0% | 9.5% | 10.0% | 10.5% |
|---|---|---|---|---|---|
| Value per share | $324 | $296 | $273 | $254 | $237 |
Every figure in this valuation comes from one model script, rerun and checked against this page each time the site is built. The XLSX model rebuilds it in live formulas: change any blue input and every year’s cash flow, the bridge to the value, the scenarios and the sensitivity table recalculate.
| To justify the price, you need | Against |
|---|---|
| Revenue growth of about 20% a year in 2027 and 2028, then the same fade | 15% and 13% |
| Or a long-run operating margin of about 46% | 35% |
| Or a discount rate near 8.5% | 10.1% |
Analysts average about $435. They value Alphabet at about 29 times consensus core earnings and give more credit for Cloud’s $514 billion backlog than this model does.
| Risk | Why it matters |
|---|---|
| Search and AI chatbots | If ChatGPT and others take commercial queries, Search growth slows where the profit is. |
| Capital spending | About $200 billion this year and more in 2027; free cash flow is already negative. |
| Dilution | The share sale and at-the-market program reverse years of buybacks. |
| Antitrust | Remedies in the U.S. search and ad-tech cases could change how Google pays for distribution and sells ads. |
Upside: Cloud backlog converting faster, TPUs sold to other AI labs, Waymo scaling, and the SpaceX and Anthropic stakes rising further.
Cloud is the fastest-growing large cloud and Search is still growing in the high teens, but free cash flow has turned negative and Alphabet is selling shares to fund about $200 billion of capex this year.
What would change the value: Third-quarter results on October 28, especially Search growth, Cloud backlog conversion and 2027 capex, would move the value most.
Ranges, not three cases. The expected value is the average of 4,000 runs of this report’s own model, with every input drawn from a range: the base case is the middle, and the bear and bull cases are the 10th and 90th percentiles. Business inputs move together; the discount rate moves on its own. The 25/50/25 weighting in the valuation section gives $254. How the ranges work
Two different questions. The rating is relative: it asks whether the stock is cheaper or dearer than the S&P 500 on the same assumptions. The absolute view asks whether it is worth its price at all: on its own the stock trades above our estimated value, which is 24% below the price.
On the same assumptions every report uses (a 5.15% Treasury yield and a 4.5% equity premium), the S&P 500 itself is worth about 68% of its price. The rating compares each stock with that: Buy if it is at least 15% cheaper than the market on this basis, Sell if at least 15% dearer, Hold in between. It is the same rule for every company, whoever owns it. The rating depends on that assumption: it would be Buy if the index grows 6% a year and Hold at 10%, against 8% here. How ratings work
Against the Street: Analysts average about $435, about 29 times consensus core earnings. This model holds the operating margin near 35% and deducts heavy net investment through 2030.
| Measure | Alphabet | Industry median | Rank | |
|---|---|---|---|---|
| Revenue growth, last fiscal year | 15.1% | 6.8% | 6 of 22 | Better than the median |
| Operating margin | 33.1% | 18.3% | 3 of 22 | Better than the median |
| Price to earnings | 16.3× | 19.4× | 8 of 19 | Better than the median |
| Free cash flow yield | 1.3% | 4.8% | 19 of 21 | Worse than the median |
Peers: the 21 other S&P 500 companies in Communication Services with complete data (APP, CHTR, CMCSA, DIS, ECHO, FOX, FOXA, GOOG, LYV, META, NFLX, NWS, NWSA, OMC, RDDT, SKYD, T, TKO, TMUS, TTWO, VZ). Last twelve months where reported, from SEC filings; prices from the latest close. A lower price-to-earnings ratio ranks higher. These figures update with each data run; the rating does not.
Cloud is working; the question is how long Search can fund the rest.