Alphabet (GOOGL): why a P/E of 17 understates the price, and how Google Cloud became the growth engine

Alphabet is the holding company created in October 2015 to sit above Google. In 2025 its revenue passed $400 billion for the first time — $402.8 billion, up 15.1% — and net income was $132.2 billion. Counting all three share classes at the Oct 2, 2026 close, the company was worth $4.18 trillion. Its stated mission, from the 10-K, is “to organize the world’s information and make it universally accessible and useful.”

Three classes of stock, two founders in control

Alphabet has Class A shares (GOOGL, one vote each), Class C shares (GOOG, no vote) and unlisted Class B shares with ten votes each. At the end of 2025, co-founders Larry Page and Sergey Brin owned about 89.3% of the Class B shares. The Class C shares were created in April 2014, when every holder of a Class A share received one Class C share. Sundar Pichai has been chief executive of Alphabet since December 3, 2019, when the founders stepped back from management.

Where the revenue comes from

Search is still more than half of the business. Google Cloud is the fastest-growing part: up 36% in 2025 and 73% in the first half of 2026 — although the 2026 figure includes Wiz, the cloud security company Alphabet bought for $29.5 billion on March 11, 2026, so not all of that growth is organic. At the end of 2025 Alphabet had a revenue backlog of $242.8 billion, mostly for Google Cloud.

Segment profit shows how different the parts are. Google Services earned $139.4 billion of operating profit on $342.7 billion of revenue (40.7%). Google Cloud earned $13.9 billion on $58.7 billion (23.7%). Other Bets lost $7.5 billion, and $16.8 billion of costs — mostly shared AI research — sit at the Alphabet level. The United States produced 48.2% of revenue.

The profit problem: paper gains on SpaceX

Alphabet’s net income for the first half of 2026 was $174.8 billion — more than its operating profit for the whole of 2025. The reason is not the business. Before taxes, $135.9 billion of it came from gains on equity investments, which the 10-Q describes as “primarily related to unrealized gains in our equity securities portfolio from SpaceX and a private company.” Operating profit in the same half was $80.5 billion, up 30%.

Over the last twelve months, that means net income of $244.2 billion, of which $149.0 billion (pre-tax) were investment gains, against $147.6 billion of operating profit. The headline price-to-earnings ratio of about 17 therefore looks far cheaper than the business is: on operating profit, the market value is 28.3 times earnings. Gains like these can reverse when the private valuations they rest on change.

Earlier years have their own footnotes, mostly European fines: €2.42 billion for shopping results in 2017, €4.3 billion for Android in 2018 and $1.7 billion for AdSense in 2019, plus a $3.5 billion fine and a $1.4 billion legal provision in 2025. 2017 also carried a $9.9 billion charge from the U.S. tax reform.

From an $85 IPO to a dividend

Google was incorporated in California in September 1998 and went public on August 19, 2004, at $85.00 a share. Along the way it bought YouTube in 2006 (paying 3,217,560 Google shares), DoubleClick for $3.2 billion in 2008 and Motorola for $12.4 billion in 2012, selling Motorola Mobile to Lenovo two years later for about $2.9 billion. A 20-for-1 split followed in July 2022, and the first dividend — $0.20 a share, together with a $70 billion buyback authorization — was announced on April 25, 2024.

$1,000 invested at the IPO price would have been worth about $160,900 at the Oct 2, 2026 close (counting the Class C shares received in 2014), or about $162,400 with dividends reinvested. The first day’s close was $100.34, so a buyer on the open market that day would have about 15% less.

Who owns it

Twenty-five of the 38 managers this site tracks held Alphabet at the end of June 2026 — one of the most widely held stocks among them. The largest position is Berkshire Hathaway’s (Warren Buffett’s company): 106.0 million shares worth $37.8 billion at the June 30 price. Berkshire first reported the stock in its 13F for the third quarter of 2025 and added 83% in the second quarter of 2026. The 13F belongs to Berkshire and does not say who chose the stock, so “Berkshire bought” is accurate and “Buffett bought” is not.

Chris Hohn and Cliff Asness also added. Bill Ackman and Andreas Halvorsen sold out, and Israel Englander cut his position by 81%.

Insiders did not buy any shares in the twelve months to October 2, 2026, and every sale — $141.2 million in total — was made under pre-arranged 10b5-1 plans, led by Sundar Pichai ($108.8 million) and Kent Walker ($25.6 million). The founders did not sell: Sergey Brin’s filings show only gifts and share conversions.

These figures describe the past and are not investment advice. The Alphabet page has the same data, updated daily.