- Company name
- Alphabet
- Sector
- Internet search & cloud computing
- About
- Alphabet owns Google. Google Search and YouTube sell advertising. This is most of Alphabet's profit today. Google Cloud rents computing power and AI tools to other companies, for a fee. Alphabet also owns Waymo, a self-driving car company, and other early-stage projects.
- Thesis
- The market prices Alphabet at a discount for two reasons. It fears AI chatbots will pull clicks away from Google Search. It also fears antitrust rulings could force costly changes to its ad business. Heavy AI infrastructure spending adds to the worry, since investors are not yet sure it will earn a good return. For the gap to close, Google Cloud must keep growing fast. Search ad revenue must also keep growing even as AI-generated answers appear next to results. A US judge ruled in September 2026 that Google will not have to sell its ad exchange or ad server, only follow new bidding rules. This removes the risk of a forced breakup, but either side can still appeal. Alphabet still faces separate antitrust matters in the EU. Alphabet is expected to report Q3 2026 earnings around October 27, 2026. That report will show whether Cloud growth and Search ad growth both continue at their current pace. If both trends hold through early 2027, and the ad-technology remedy does not cut ad revenue much, the discount can close over the next two to four quarters.
- Risks
- Google Cloud's growth depends on continued heavy AI spending by Alphabet and by its customers. If AI infrastructure spending slows, Cloud growth can slow with it.
AI chatbots and AI-generated answers could reduce the number of clicks on search ads over time. This effect is hard to measure today, since search ad revenue is still growing.
The September 2026 ad tech ruling requires Google to change how its ad exchange and ad server work, such as sharing bid data with rivals. Compliance costs, or a later appeal that reopens the remedy question, add uncertainty to advertising revenue.
In September 2026, a US judge ruled in the ad tech antitrust case that Google must change its ad auction rules but does not have to sell its ad exchange or ad server. Either side can still appeal, and Alphabet faces separate antitrust matters in the EU.
- Recent events
- 2026-09-02: A US judge ruled that Google does not have to sell its AdX ad exchange or its DFP ad server. Google must instead follow new rules for ad auctions, such as sharing real-time bid data with rival ad servers and dropping its "first look" and "last look" bid advantages.
2026-07-22: Alphabet reported Q2 2026 results. Revenue grew 24% to $119.8 billion. Google Cloud revenue grew 82% to $24.8 billion.
2025-09-02: A US court ruled on remedies in Google's search antitrust case. Google keeps Chrome and Android. Google must end exclusive default-search deals and share some search data with rivals.