Key Takeaways
- Alphabet is in talks to join a data-security group for the $185 billion Golden Dome missile-defense program, Bloomberg reported, after the stock’s worst month since its 2004 IPO.
- Any Golden Dome deal would be small next to the $500 billion of revenue analysts expect from Alphabet this year, but the US government could become a big buyer of the computing Alphabet is building.
- Alphabet expects to spend as much as $205 billion on capex in 2026, and its free cash flow was negative $9.1 billion in the third quarter.
- At about 20x forward earnings, well below its 10-year average of 24x, the stock doesn’t price in much of that upside.
Alphabet (GOOG) just had its worst month since it went public in 2004. The stock fell nearly 19% in October and lost about $758 billion in market value, by Yahoo Finance’s count. Most of the damage came on October 29, when its Class A shares fell 12.6% after third-quarter results, Alphabet’s biggest one-day drop since its listing.
Then, on October 30, the Pentagon came into the picture.
What Google Is Talking to the Pentagon About
Google is in talks with the Defense Department about a new data-security effort for the $185 billion Golden Dome missile-defense program, Bloomberg reported. The details:
- The Pentagon is setting up an industry group to protect the data that feeds Golden Dome’s command-and-control software, which a separate group including Anduril, Palantir and SpaceX is building.
- The talks have focused on Google’s data storage, networking and cybersecurity.
- Aalyria Technologies, a networking company spun out of Google, is part of the group.
- It’s early. A Pentagon official said no final decision has been made on the group or its members, and no contract size was given.
This would be Google’s first publicly known role in Golden Dome. That’s a long way from 2018, when employee protests over Project Maven led Google to drop that military AI contract. In April, it signed an agreement for the Pentagon to use its AI models for classified work.
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Golden Dome Is Small, the Customer Isn’t
On its own, the deal won’t add much. Analysts expect Alphabet’s revenue to climb from $403 billion in 2025 to $500 billion this year and $774 billion by 2028.
Google would get a share of one data-security group inside a program spread across many companies. That won’t move those estimates.
The customer is what matters. On TBPN on October 30, Will Manidis, founder of the AI startup ScienceIO, argued that training the best models will get so expensive that only one or two countries can keep up. He expects AI labs to look more like defense contractors, with their best models kept for national security work, and he expects the money to follow: “A bigger and bigger share of Frontier Lab revenues are just going to be from USG.”
That’s the US government, and Alphabet needs every big buyer it can get. Its capital spending nearly quadrupled from 2021 to 2025, from $24.6 billion to $91.5 billion.
This year is far bigger. Alphabet expects to spend $195 billion to $205 billion in 2026, a range it set in July and held when it reported on October 28. CFO Anat Ashkenazi said spending will rise significantly again in 2027. Free cash flow was negative $9.1 billion in the quarter.
Most of that buildout serves Google Cloud, where third-quarter revenue more than doubled to $30.7 billion and the backlog reached $561 billion. A government that wants its own frontier AI is one more buyer for that capacity.
Search Is Still Alphabet’s Weak Spot
Search pays for most of the buildout, and it’s slowing. Search and other revenue grew 12% to $63.4 billion in the third quarter, short of the $64.9 billion analysts expected, according to Yahoo Finance.
After October’s selloff, the stock trades at about 20x forward earnings, against an average of 24x over the last decade.
That’s above the 16x low it hit in April 2025, but well below its usual level.
Conclusion
October’s selloff went too far. Golden Dome won’t fix Search, and a deal with no size may never happen. But at 20x, the market is paying little for a Cloud business that doubled its sales last quarter, and Washington is lining up as a buyer for exactly what Alphabet is building. The fourth-quarter report in early February is the next test. That’s where Alphabet should put a number on 2027 spending, and where Search has to stop slowing.
So what is Alphabet stock actually worth?
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Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
