Key Takeaways
- Alphabet stock is down 19% in the past month, mostly after a third-quarter report with slower Search growth and negative free cash flow of $9.1 billion.
- Meta’s results a week earlier had revived worries about Big Tech’s AI spending.
- Search still grew 12%, and Google Services earns more than three times Cloud’s operating income.
- At about 20x forward earnings, below its 23x five-year average, Alphabet looks like a buy, with its 2027 spending plan as the next test.
Alphabet (GOOG) stock is down 19% in the past month, mostly after its third-quarter report on Oct. 28.
Meta Platforms (META) set the stage a week earlier by reviving worries about Big Tech’s AI spending.
The morning after the report, Jim Cramer, host of CNBC’s Mad Money, posted that Microsoft “exercised tremendous restraint and Alphabet is lost for all but cloud.”
TIKR Tracks 59 Analysts on Alphabet. How Many Say “Buy”?
See the full breakdown of Buy, Hold, and Sell ratings on Alphabet, along with Wall Street’s revenue and earnings estimates, all in one place. More than 500,000 investors use TIKR to research stocks like this one. See Alphabet’s Analyst Ratings
Alphabet’s Search Slowed as Spending Soared
Search & other grew 12% to $63.4 billion, about $1.5 billion short of estimates and down from 17% in the second quarter.
That came even as CEO Sundar Pichai said query growth was “the highest it’s been in the last five years.” Chief Business Officer Philipp Schindler blamed currency, plus lower monetization in AI Mode. The second reason worries me: Google is answering more questions than ever but earning less on each AI answer than on a classic search.
Capex hit $51.4 billion, above the $42.3 billion of cash from operations, so free cash flow was negative $9.1 billion, its second negative quarter in a row.
Meta showed the same squeeze on Oct. 21: its $34.9 billion of third-quarter capex topped its $32.8 billion of operating cash flow, and it narrowed its 2026 capex range to $135 billion to $145 billion. Meta stock is down 15% over the month. How long can each ad business carry the build?
And CFO Anat Ashkenazi expects Alphabet’s capex “to increase significantly in 2027.” TIKR’s consensus has normalized EPS at $15.14 a share in 2027 and $18.26 in 2028:
Cramer’s Half Right
Cloud revenue grew 103% to $30.7 billion, and its operating margin rose to 36.2% from 23.7%. But “lost” goes too far: Google Services still earned $39.2 billion of operating income, more than three times Cloud’s $11.1 billion.
About 20x, and I’d Start Buying
Alphabet now trades at about 20x forward earnings, below its five-year average of 23x and far from April’s 33x:
At that discount, I’d start buying in small amounts.
Of course, Alphabet plans to detail its 2027 spending on its fourth-quarter call, likely in early February. Another Search slowdown next to a much bigger capex number would keep the pressure on.
So what is Alphabet stock actually worth?
TIKR lets you forecast the future price of any stock in less than a minute. Just enter a few assumptions into TIKR’s valuation model and see what Alphabet could be worth. Start from Wall Street consensus estimates, or adjust the inputs to reflect your own view of the business. It’s free to use.
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!
