Over the past month, Alphabet (GOOG, GOOGL) shares have taken investors on a roller-coaster ride. After hitting an all-time high of $350 in early February, the stock tumbled more than 20% in just a few weeks. A nearly 5% rebound on Tuesday has left many wondering: Is the pullback over? Has the bottom arrived?
For value investors, however, a more relevant question than calling the exact bottom is whether the stock looks compelling at current levels.
Alphabet’s latest earnings report showed net income jumped 30% year over year in the fourth quarter, while the stock currently trades at a forward P/E ratio of around 26. That puts its PEG ratio below 0.9 — a modest valuation among high-growth tech giants.
More importantly, that 30% growth came from broad-based acceleration across its core businesses. Total revenue rose 18% year over year to $113.8 billion. Search revenue growth accelerated from 15% to 17%, driven in part by AI-powered features: search sessions in AI Mode are three times longer than traditional searches, opening up new opportunities for targeted advertising.
The real highlight, however, is Google Cloud. Fourth-quarter cloud revenue reached $17.66 billion, up 48% year over year. Even more striking was the cloud backlog, which surged 55% sequentially to $240 billion. During the earnings call, CEO Sundar Pichai attributed the expansion to broad-based customer demand for enterprise AI products. Revenue from products built on Alphabet’s generative AI models grew nearly 400% year over year, with momentum continuing to accelerate.
In other words, AI is no longer just a narrative for Alphabet — it’s showing up clearly in backlog and revenue figures.
Alphabet expects 2026 capital expenditures to range between $175 billion and $185 billion, primarily for data centers and AI chips. But the company has the financial strength to support that level of investment. In the fourth quarter alone, operating cash flow hit a record $52.4 billion, with net income reaching $34.5 billion. The core search business continues to generate substantial cash, funding both cloud expansion and shareholder returns through buybacks and dividends.
On the risk side, investors should monitor whether enterprise adoption of AI software tools slows, as well as the return on invested capital from Alphabet’s massive data center build-out. Short-term volatility may persist.
Still, the fundamentals paint a compelling picture: accelerating search growth, a cloud backlog that signals strong future revenue, robust profitability, and a valuation that appears reasonable relative to growth. Buying a dominant industry leader with a $240 billion cloud backlog and 30% earnings growth at a 26x P/E multiple suggests a favorable risk-reward profile in the current market environment. For value-focused investors, this may be a moment worth a closer look.
