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By Keithen Drury–Jul 30, 2026 at 5:00PM EST
+Fool.comon Share
Summarize with AI
Key Points
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The market is more focused on Alphabet's spending than its performance.
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The stock is priced to buy.
Alphabet( GOOG-0.62%)( GOOGL-0.91%) has been a strong stock pick over the last few years, but I think investors just got another reason why it can continue to deliver incredible performance over the next few years. During its second-quarter earnings presentation, Alphabet informed investors that its Google Cloud backlog had spiked to $514 billion. For reference, Google Cloud generated $24.8 billion in revenue during Q2 2026. At that run rate, it would take Alphabet over five years to churn through its backlog. That's not going to happen in that long a time frame, as Alphabet will increase its computing resources to allow it to churn through that backlog much faster.
That is a recipe for great company success, and I think it will also deliver strong stock performance. If you don't have shares of Alphabet, now is the time to load up, while the market is distracted by spending rather than focusing on real business performance.
Image source: The Motley Fool.
You have to spend money to make money
The market isn't all that concerned about Alphabet's dominant Q2 performance. Even though Google Cloud's revenue grew at a jaw-dropping 82% year-over-year pace and achieved a 36% operating margin, it cares more about how much Alphabet is spending. Alphabet hiked its capital expenditure guidance to $195 billion to $205 billion this year, which has the market concerned that it's overspending on its artificial intelligence (AI) computing capacity.
Expand
NASDAQ: GOOGL
Alphabet
Today's Change
(-0.91%) $-3.05
Current Price
$333.66
Key Data Points
Market Cap
$4.1TMarket cap calculated using publicly traded shares outstanding only. Does not include unlisted, private, or dual-class non-traded shares. Implied market cap may vary.
Day's Range
$330.34 - $336.51
52wk Range
$187.82 - $408.61
Volume
413.4K
Avg Vol
32.3M
Gross Margin
60.94%
Dividend Yield
0.25%
However, I think this is short-sighted thinking. If you owned a business that was rapidly growing and could monetize part of that business via cloud computing, wouldn't you spend as much money as possible to maximize your market share? I think the market has lost sight of this, and that Alphabet is spending big because it knows there is a massive backlog that will turn into recurring revenue over the long term.
This justifies the spending, and I think it is all the reason investors need to load up on the stock.
But if you're looking for one more reason, the stock is also fairly priced. Alphabet's price-to-earnings (P/E) ratio metrics are skewed due to a massive return from its SpaceX investment. Instead, I'll value the stock using operating cash flow. From this perspective, Alphabet is approaching the lowest levels it has traded at in essentially a year, and I think it's a great value.
GOOG Price to CFO Per Share (TTM) data by YCharts
Alphabet has the growth and catalyst it needs to turn into an even larger company, and I think right now is the perfect opportunity to scoop up shares.
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About the Author
Keithen Drury is a contributing Motley Fool technology analyst covering AI, semiconductors, cybersecurity, and SaaS stocks. In addition to The Motley Fool, Keithen is a mechanical engineer and has held roles at Honeywell and smaller industrial companies like Brand Hydraulics and Lincoln Industries. He holds a bachelor’s degree in mechanical engineering from Dordt University.
Stocks Mentioned
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Alphabet\
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NASDAQ: GOOGL\
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$333.66\
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(-0.91%)-$3.05
Motley Fool Stock Advisor’s Latest Pick
---% Avg Return
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Alphabet\
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NASDAQ: GOOG\
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$333.68\
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(-0.62%)-$2.08
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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