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Alphabet Just Gave Investors 514 Billion Reasons to Load Up on Shares
The Motley Fool • • business
Key Points:
- Alphabet reported a significant increase in its Google Cloud backlog, reaching $514 billion, indicating strong future revenue potential as the company plans to expand computing resources to process this backlog faster.
- Google Cloud's revenue grew 82% year-over-year in Q2 2026, achieving a 36% operating margin, showcasing robust business performance despite market concerns over Alphabet's increased capital expenditure guidance of $195 billion to $205 billion.
- The market's focus on Alphabet's high spending on AI computing capacity is seen as short-sighted, as the company is strategically investing to capture a larger market share and convert its substantial backlog into recurring revenue.
- Alphabet's stock is currently considered fairly valued, with its price-to-earnings ratio influenced by a significant return from its SpaceX investment, but operating cash flow analysis suggests the stock is near its lowest valuation in a year, presenting a potential buying opportunity.
