Berkshire Hathaway's massive expansion of its Alphabet position has refocused investor attention on the search giant as a discounted mega-cap AI play.
Despite Alphabet's Q2 2026 revenue of $119.80 billion (up 24.2% year-over-year) and Google Cloud's 82% acceleration with a $514 billion backlog, the stock has retreated 7.2% over the past month.
At a 17× trailing P/E and with nearly 90% of the Fortune 100 using Gemini Enterprise, 24/7 Wall St. sees the current pullback as an opportunity, setting a $445.49 price target with 29.68% upside and 90% confidence—though heavy capex guidance ($175–$185 billion for 2026) poses a near-term execution risk.
What happened
Berkshire Hathaway dramatically expanded its Alphabet stake in a single quarter, prompting 24/7 Wall St. to set a price target of $445.49—implying 29.68% upside from Friday's close of $343.54—with a 90% confidence buy recommendation. Alphabet's Q2 2026 results showed revenue of $119.80 billion (up 24.2% year-over-year), Google Cloud accelerated to 82% growth with a $514 billion backlog, and Gemini now processes 22 billion API tokens per minute.
Why it matters
Alphabet trades at a 17× trailing P/E—cheaper than Microsoft (28×) and Meta (22×)—despite delivering comparable cloud growth and 11 consecutive EPS beats. The stock has cooled 7.2% in the past month despite strong fundamentals, creating what Berkshire appears to view as a valuation opportunity. For businesses evaluating AI infrastructure providers, Gemini's adoption among nearly 90% of the Fortune 100 signals enterprise traction.
What to watch
The bear case hinges on capex guidance of $175–$185 billion for 2026 and long-term debt rising from $46.5 billion to $98.2 billion, raising questions about return on invested capital. 24/7 Wall St.'s bull case reaches $510.93 (a 48.72% gain) if TPU (a custom AI chip) sales scale into 2027 as management guided. Regulatory risk remains material—the European Commission levied a $3.5 billion fine last quarter.
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Alphabet's stock pullback over the past month—down 7.2% despite strong Q2 2026 fundamentals—appears driven by investor concerns over capital intensity rather than business weakness. The company's Q2 revenue of $119.80 billion (up 24.2% year-over-year) and Google Cloud's 82% acceleration with a $514 billion backlog, alongside Gemini's enterprise penetration (nearly 90% of Fortune 100), signal robust demand for both cloud infrastructure and AI services. Yet the capex nearly doubled to $44.92 billion in Q2, and management has guided $175–$185 billion for full-year 2026, while long-term debt swelled from $46.5 billion to $98.2 billion and free cash flow turned negative.
Buffett's decision to dramatically increase Alphabet's position shortly after the earnings report suggests he views the current valuation as an opportunity—a thesis supported by Alphabet's 17× trailing P/E versus Microsoft's 28× despite comparable cloud growth. The stock's 69% gain over the past year has cooled, but 11 consecutive EPS beats (including a Q2 beat of $9.11 versus $3.04 consensus) underscore execution consistency. The bear case centers on whether the capex surge produces the contracted revenue growth management expects; the bull case hinges on TPU (custom AI chip) external sales scaling into 2027, which 24/7 Wall St.'s $510.93 bull scenario assumes.
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