AAS RESEARCHEvidence register

GOOG · ENGLISH V1 · 22 OCTOBER 2026

Alphabet.
Segments, capex and value.

Segment economics. AI capex. Net cash and stakes. What the price requires.

English v1 · 22 October 2026Nasdaq: GOOGQuote: $330.95 · 21 Oct 2026Balance anchor: 30 Jun 2026

SUMMARY

Price is 75.3% above central value.

Purpose. This is a quality sample of company research. It states findings and their evidence.

Fair value. Our central estimate is $188.82 per share. The 21 Oct 2026 close of $330.95 is 75.3% above this value.S14S15 Two practitioner checks give $168.80 to $239.16 (cross-check).

On evidence available on 22 October 2026, the price is 75.3% above our central value of $188.82. The price requires revenue to compound at 17.5% a year for ten years, against 11.6% in our central path. At central operations, the price implies a discount rate of 7.13%, against our dated 9.75%.

Risk measure. Scenarios use real company years. A FY2022–23 trough regime gives $103.93. The H1 2026 run-rate regime gives $284.23. The range is 95% of the central value. The price is 16.4% above the run-rate case. A stress with trough operations and permanently high capex gives $67.55; it is outside the weights.

The business. Alphabet is an exceptional franchise in a heavy investment phase. Services earned 41.9% operating margin over the last twelve months. Cloud revenue grew 73% in H1 2026 and carries a $513.9bn backlog.S1S2 Capex reached $132.4bn in the twelve months to June; free cash flow fell to $53.3bn.S2

Why the value moved from $103.78. The earlier note applied 12 × FY2025 EPS less 20%. It held no growth, no cash and no cost of capital. Our no-growth earning power is $102.29 per share, close to the old figure. Net cash and investments add $19.74. Growth in the central path adds $66.79 (section 10).

What changes the view. Three facts move the value most: the pre-depreciation margin Cloud earns at scale, the capex intensity after 2027, and the discount rate. One point off the WACC gives $227.41. A 55% Cloud margin gives $211.29. Terminal capex at 12% of revenue gives $202.36.

Review status: provisional. Two blind rounds ran. Round 1 closed one resolvable fact (the trough Cloud path sat below contracted backlog) and moved the Bear case; the central value did not move. Round 2 found no new resolvable fact, but the rule needs two quiet rounds in a row, and Q3 2026 results (projected 28 October) will test Cloud margin, capex and investment marks. Open items: Cloud backlog concentration and whether the unnamed investee is a Cloud customer; construction in progress, not split in the filings read; cash versus book tax.

Set your own scenario weights

Case values come from the model and do not change with weights. Weighted value = Σ weight × case value. Weights are your judgement; the defaults are placeholders, not probabilities. The stress row is not a weighted case.

CROSS-CHECK

Two checks beside the central value.

Two practitioner checks sit beside the cash-flow value. Each uses Alphabet’s own history and reported figures. The earlier flat rule is shown for the record.

MethodValue / sharevs DCF centralPrice vs valueAgreement
DCF central (Base, section 08)$188.82—75.3% aboveReference
Median year-end P/E FY2022-25 x core TTM EPS$239.16+26.7%38.4% aboveDisagrees (more than 15%)
Owner earnings capitalised at cost of equity less 3% growth, plus net cash and investments$168.80-10.6%96.1% aboveAgrees (within 15%)
Earlier flat rule: 12 x FY2025 EPS less 20%$103.78-45.0%218.9% aboveDisagrees (more than 15%)
(a) Core TTM EPS = TTM operating income $147.6bn × (1 − 17%) / 12.284bn shares = $9.98. Equity-security gains are excluded. Median year-end P/E FY2022–25 (2022: 19.3×, 2023: 24.1×, 2024: 23.9×, 2025: 29.1×) = 24.0×. Value = 24.0 × $9.98 = $239.16
(b) Owner earningsS23 = TTM NOPAT $122.5bn (maintenance capex = depreciation). Value = (NOPAT × 1.03 / (cost of equity 9.89% − 3%) + net cash and investments $242.5bn) / 12.284bn = $168.80
(c) Earlier rule = 12 × FY2025 diluted EPS $10.81 × (1 − 20%) = $103.78

Where they disagree. The P/E check is +26.7% from the DCF. Historical multiples were set when the 10-year Treasury yield was lower and capex was 10–15% of revenue.S11S12 The owner-earnings check capitalises today’s NOPAT and ignores the capex build. The DCF charges that build in full. All three methods agree on direction: the price is above each value. At the price, the core P/E is 33.2×.

EVENT IMPACT NOTE

Events since the last filing.

Thesis intact. No operating-results filing followed the Q2 10-Q of 23 July. The capex guide rose, debt rose, and the discount rate rose. None of these changes the regime cases; each sits in a model input.

DateEventChannelMechanismModel effect
2026-07-222026 capex guidance raised to $195–205bn; 2027 to increase significantlyS17S18estimateHigher capex lowers near-term FCF and raises later depreciation2026 capex at $200bn midpoint; 2027 capex is a case input
2026-07-23Q2 10-Q: $49.6bn equity raise incl. mandatory convertible preferred; $40bn ATM programmeS1S9flowsNew shares and preferred conversion dilute; cash added to the bridgeShares include preferred at maximum conversion
2026-08-10$25bn senior notes closedS7flowsCash and debt rise by the same amount; coupon cost inside WACCNone on the bridge
2026-09-02Ad tech remedy: court rejects ad exchange divestiture, orders conduct changesS19S20multipleLower break-up risk for Network revenue ($7.3bn in Q2)None; Network is 6% of revenue
2026-10-01Implied US equity risk premium 4.20%S13discount rateSets the market premium in the cost of equityIn the dated WACC
2026-10-2110-year Treasury par yield 5.13%S12discount rateRisk-free base of the cost of capitalWACC 9.75%; one point lower gives the sensitivity row
2026-10-28 (projected)Q3 2026 results, date not confirmed by the companyS29S26estimateQ3 Cloud margin, capex and other income test the casesPending

Channels: estimate, multiple, discount rate, flows, read-across. An event without a mechanism is sentiment and does not enter the value.

CONTEXT

Snapshot and the forces on value.

Alphabet Inc. reports three segments: Google Services, Google Cloud and Other Bets. AI research costs sit at group level.S1 The security here is Class C stock (GOOG, Nasdaq), CIK 1652044.S10

ItemValuePeriod / date
Price$330.9521 Oct 2026S14S15
Shares used12.284bn (common 12.230bn + preferred at maximum conversion)15 Jul 2026S1
Market value$4,065bncalculated by us
Revenue, TTM$445.9bnto 30 Jun 2026S2S3
Operating income, TTM$147.6bnto 30 Jun 2026S2S3
Free cash flow, TTM$53.3bncompany definition, reportedS2
Net cash and investments, base$242.5bn30 Jun 2026, calculated by us
ForceCurrent signalDirectionChannel
Search and other adsGrowth 17% in Q2 2026 (Q2 2025: 12%)S2StrongEstimate
Cloud demandRevenue +82% in Q2; backlog $519.5bn, just over half due in 24 monthsS1S2StrongEstimate
Capex cycle2026 guide $195–205bn; 2027 to rise significantly; commitments $811.0bnS1S17S18Adverse to cash nowEstimate
Rates10-year Treasury 5.13% on 21 OctS12AdverseDiscount rate
Equity premiumImplied ERP 4.20% on 1 OctS13NeutralDiscount rate
AntitrustAd tech remedy without divestiture, 2 Sep 2026; search remedies under appealS19S20Lower tail riskMultiple
FundingEquity raise $49.6bn (June), debt proceeds $24.8bn (Q2) and $25bn notes (Aug)S2S7Dilution, leverageFlows
Investment marksEquity gains $99.0bn in Q2, mainly SpaceX and a private companyS1S2VolatileRead-across

RESEARCH QUESTIONS

Five questions the value depends on.

QuestionAnswered in
Does the AI capex earn its cost of capital?Section 03, section 09
How much of the value is Cloud, and how much is Services?Section 07
What growth does the current price require?Section 08
What are the cash and the investment stakes worth per share?Section 04
Why does this value differ from the earlier flat-rule figure?Section 10

METHOD

Validated data, deterministic arithmetic, independent challenge.

Language models write fluently but compute and recall probabilistically. This method confines them to reasoning. Data and arithmetic stay outside the model.

LayerWhat it doesControl
1. Validated dataEach figure comes from a filing, regulator or dated market source, with period and unit.Source register; issuer documents count as one origin; gaps marked Unverified.
2. Deterministic modelOne code model computes every forecast, valuation and sensitivity.Same inputs give the same output. Prose numbers are generated from model output.
3. Multi-agent reasoningSeparate reviewers receive facts without the conclusion and search for omissions.Each finding changes the model or stays open; a new resolvable fact sends the work back to data collection.

Company class. A classification step runs before data collection. Alphabet has three segments with different economics, so it takes the sum-of-parts route. Each segment is valued on its own cash flows. A single group ROIC and a group Faustmann ratio are not valid tests for this class; section 09 shows them for comparison only.

Two-phase review. Phase A closes resolvable facts from primary data before any judgement round: the statutory tax rate, the dated 10-year yield, a regression beta and a dated equity premium. Phase B runs blind rounds. A result is stable when two rounds in a row keep the conclusion, move the central value by less than 1% and find no new resolvable fact.

Review status: provisional. Two blind rounds ran. Round 1 closed one resolvable fact (the trough Cloud path sat below contracted backlog) and moved the Bear case; the central value did not move. Round 2 found no new resolvable fact, but the rule needs two quiet rounds in a row, and Q3 2026 results (projected 28 October) will test Cloud margin, capex and investment marks. Open items: Cloud backlog concentration and whether the unnamed investee is a Cloud customer; construction in progress, not split in the filings read; cash versus book tax.

RoundPhaseFindingEffect on centralOutcome
AFactsDated 10-year Treasury 5.13% (5.24% on 1 Oct, so the premium date does not double-count the rate), regression beta 1.134, implied ERP 4.20%, tax 16.8% to 2027 and 21% from 2030WACC 9.75%Closed from primary data
1JudgementTrough Cloud path below the backlog due in 24 months; depreciation-rate label; Cloud profit share; Wiz share of goodwill; preferred ranges; Other Bets stake reported as majorityCentral unchanged; Bear $91.96 to $103.93; Bull $282.36 to $284.23Fixed; Bear Cloud 2027 growth 26% to 33%
2JudgementBacklog concentration and investee overlap; reinvestment return; single WACC; leases not commenced; stake marks; funding pathNoneNo new resolvable fact; items kept as sensitivities and open questions

Signal strength. Strong: audited and filed figures (levels 1–3). Medium: dated market data and practitioner datasets. Weak: press reports and trackers (section 12).

Weights. Scenario weights are the reader’s judgement. The calculator in the Summary shows how the weighted value moves. This makes the judgement visible.

Compared with typical AI research. Typical output states numbers from memory and one valuation. Here every figure carries a source and date, the arithmetic is reproducible, and the conclusion survived blind challenge.

01 — RESEARCH NOTE

Security, filings and route.

GOOG is Alphabet Class C capital stock on Nasdaq. Class C carries no vote. Class A (GOOGL) and Class B share the same economics.S1S10 The SEC register lists SIC 7370.S10

The latest periodic filing is the Q2 2026 Form 10-Q, filed 23 July 2026. No Q3 2026 10-Q is on file on 22 October 2026.S10 A report date of 28 October 2026 is projected by a calendar service and is not confirmed by the company.S29S26

FieldValueSource
IssuerAlphabet Inc., CIK 1652044S10
Class C shares, 15 Jul 20265.527bn of 12.230bn total commonS1
Mandatory convertible preferred19m shares, $1,000 liquidation, 6.25%, converts about 15 May 2029S1, S8
Latest annual reportFY2025 10-K, 5 Feb 2026S3
RouteSum of parts: three segments with different economicscalculated by us

02 — RESEARCH NOTE

Segment economics.

Services earns the profit. Cloud turned from a loss in FY2022 to 14% of Services plus Cloud income. Other Bets and group AI research cost $30.5bn a year.

PeriodServices revenueServices marginCloud revenueCloud marginOther Bets OIGroup-level OIGroup margin
FY2022$253.5bn32.6%$26.3bn-7.3%−$4.6bn−$1.3bn26.5%
FY2023$272.5bn35.2%$33.1bn5.2%−$4.1bn−$9.2bn27.4%
FY2024$304.9bn39.8%$43.2bn14.1%−$4.4bn−$10.5bn32.1%
FY2025$342.7bn40.7%$58.7bn23.7%−$7.5bn−$16.8bn32.0%
TTM Jun 2026$367.1bn41.9%$77.6bn31.3%−$8.9bn−$21.5bn33.1%

Sources: FY2022 from the FY2023 10-K; FY2023–25 from the FY2025 10-K; TTM from the Q2 2026 10-Q, all reported by the company.S4S3S1 TTM = FY2025 + H1 2026 − H1 2025, calculated by us.

TTM Services revenue = 342.721 + 184.177 − 159.807 = 367.091bn

SBC is a cost here. Stock-based compensation was $28.1bn over the TTM.S2S3 Segment operating income already deducts it. The model does not add it back. The share count therefore adds no further dilution for future grants.

Depreciation by segment is not disclosed. The model needs a pre-depreciation margin per segment, because capex is modelled once for the group. We allocate depreciation 50% to Services, 45% to Cloud and 5% to group level. This split is our assumption. On it, the TTM pre-depreciation margin is 45.3% for Services and 46.0% for Cloud. A 30/65 split gives a central value of $199.72 (appendix F).

Pre-depreciation margin = (segment OI + allocated share × depreciation) / segment revenue; Services TTM = (153.792 + 0.50 × 25.237) / 367.091 = 45.3%

Customers. No customer or group of affiliated customers was above 10% of revenue in 2023, 2024 or 2025.S3 Named Cloud customers behind the backlog are not disclosed in the 10-Q or 10-K; we searched both and the Q2 release (Unverified).S1S2S3

03 — RESEARCH NOTE

AI capex and how the model normalises it.

Capex has run at two to five times depreciation since FY2022. The gap is growth capex. It must earn a return later, and it raises depreciation for years.

PeriodCapexCapex / revenueDepreciationCapex / depreciation
FY2022$31.5bn11.1%$13.5bn2.3×
FY2023$32.3bn10.5%$11.9bn2.7×
FY2024$52.5bn15.0%$15.3bn3.4×
FY2025$91.4bn22.7%$21.1bn4.3×
TTM Jun 2026$132.4bn29.7%$25.2bn5.2×
FY2026 guide (midpoint)$200bn40.8% of central revenue$30.2bn (model)6.6×

Capex and depreciation are reported in the cash flow statement.S2S3S11 The 2026 guidance of $195–205bn comes from the Q2 call, reported by two press sources; the 10-Q says only that 2026 investment will “significantly increase”.S17S18S1

Commitments behind the build. Purchase commitments were $811.0bn on 30 June 2026, of which $200.7bn short-term. Leases not yet commenced add $85.2bn. Revenue backlog was $519.5bn, with $513.9bn in Cloud; just over half is expected within 24 months.S1

Maintenance versus growth. The company does not split capex. We use depreciation as the maintenance proxy. On that proxy, TTM maintenance capex was $25.2bn and growth capex $107.2bn, calculated by us. The proxy understates maintenance when server lives shorten.

Growth capex (proxy) = capex − depreciation = 132.402 − 25.237 = 107.165bn

Normalisation in the model. 2026 capex is the guidance midpoint. 2027 capex is a scenario input ($230bn / $250bn / $270bn). From 2028 the capex-to-revenue ratio fades in a straight line to a terminal ratio by 2032 (12% / 15% / 16%). Depreciation is a rate on opening net plant plus half of the year’s capex: 8.7% now, which reproduces 2026 depreciation of about $30bn, rising to 11.5% by 2029 as construction enters service. The terminal value then charges reinvestment as growth divided by return on new capital.

Depreciationt = ratet × (opening net PP&Et + 0.5 × capext); net PP&Et+1 = net PP&Et + capext − depreciationt
H1 2026 rate = 2 × 13.586 / average net PP&E (246.597 + 321.212) / 2 = 9.6%

In the central path, depreciation rises from $30.2bn in 2026 to $119.7bn in 2030. The EBIT margin falls from 33.1% TTM to 25.9% in 2029, then recovers to 28.5% by 2035. Free cash flow stays negative until 2029.

Purchase-commitment loss rate. The company reports no write-down history on these commitments in the filings searched (10-K FY2023–25, 10-Q Q1–Q2 2026). We run no loss stress; the bear case cuts capex intensity instead (Unverified).S1S3S4

04 — RESEARCH NOTE

Net cash and investments, added to value.

Cash, bonds and equity stakes are added to the operating value. Debt and the tax on unrealised gains are subtracted.

Item, 30 Jun 2026Carrying valueBearBaseBull
Cash, government, corporate and asset-backed debt securities$155.4bn$155.4bn$155.4bn$155.4bn
Marketable equity securities (incl. $14.1bn restricted SpaceX shares)$101.2bn$81.0bn$101.2bn$101.2bn
Non-marketable securities$131.5bn$92.0bn$111.7bn$131.5bn
Deferred income tax liability−$22.8bn−$22.8bn−$22.8bn−$22.8bn
Debt (long-term plus current portion)−$100.2bn−$100.2bn−$100.2bn−$100.2bn
Preferred dividends to conversion, present value—−$2.8bn−$2.8bn−$2.8bn
Total$202.6bn$242.5bn$262.2bn
Per share$16.49$19.74$21.35

Balances are reported by the company.S1S2 Haircuts are our assumptions: non-marketable stakes 30% / 15% / 0%, marketable equity 20% / 0% / 0%. Most non-marketable value is a mark from observed transactions: $87.9bn was remeasured in Q2, cost was $47.6bn and cumulative net upward adjustments $76.6bn.S1 The company names SpaceX and one private company as the source of the Q2 gains; the private company is not named (Unverified).S1

Base bridge = 155.411 + 101.189 + 131.461 × (1 − 15%) − 22.819 − 100.164 − 2.843 = 242.5bn

Operating leases ($18.0bn) are not subtracted: lease cost sits inside operating margins. The $25bn August notes raised cash and debt by the same amount, so the bridge does not change.S7 Funding commitments to unconsolidated entities of $21.9bn convert cash into stakes; they are not subtracted.S1

Share count. Common shares were 12.230bn on 15 July 2026.S1 The 19m preferred shares convert at 2.252–2.816 (Series A) or 2.274–2.842 (Series B) common shares each; below the initial price the maximum rate applies, so we add 53.8m shares.S1S8 Unvested RSUs (294m) are excluded because their cost is inside future operating income; including them gives $184.41.

Shares = 12.230bn + 19m × 2.829 = 12.2838bn

Other Bets. Bear: TTM losses of about $9bn continue five years (−$2.93 per share). Base: zero; losses offset by option value, a judgement. Bull: $63bn, half of the Waymo round value, because Alphabet is reported as majority holder. The February 2026 round valued Waymo at $126bn including new money; a pre-close report said about $110bn. We use the closed round and do not average.S21S22 Alphabet’s stake is not disclosed (Unverified).

05 — RESEARCH NOTE

Cost of capital, from dated inputs.

All rate inputs are dated and closed from data before any judgement round.

InputValueBasis
Risk-free rate5.13%10-year Treasury par yield, 21 Oct 2026S12S30
Equity risk premium4.20%Implied, 1 Oct 2026S13
Beta, 2-year weekly1.201104 weeks vs S&P 500S14S16
Beta, 5-year weekly1.199260 weeks vs S&P 500S14S16
Beta used (Blume-adjusted mean)1.1340.67 × raw + 0.33
Cost of equity9.89%CAPM
Pre-tax cost of debt5.10%Q2 interest expense × 4 / debtS1
Debt weight2.4%market values
Tax rate16.8% to 2027, 21% from 2030FY2025 effective rate; US statutory rateS3
WACC (all scenarios)9.75%calculated by us
Cost of equity = 5.13% + 1.134 × 4.20% = 9.89%
WACC = 0.976 × 9.89% + 0.024 × 5.10% × (1 − 21%) = 9.75%

Terminal growth is 3.0% in every case, below the risk-free rate. The cases differ in operations, not in the discount rate. A global issuer with a US premium only is a simplification; no country premium is added.S25

06 — RESEARCH NOTE

Scenarios from real company years.

Each case copies a regime Alphabet has lived through. No case pushes every factor at once.

InputBearBaseBull
RegimeFY2022–23 troughFY2024–25 normalH1 2026 run-rate
EvidenceServices growth 7.5% (FY23); Services margin 32.6%–35.2%Services growth 11.9%–12.4%; Cloud 30.6%–35.8%Services +15.2%, Cloud +73.1% (H1)
Services growth H2-26 / 2027 / 2028 … 20358% / 6% / 6% … 2.5%12% / 10% / 9% … 3.0%15% / 12% / 11% … 3.5%
Cloud growth H2-26 / 2027 / 2028 … 203550% / 33% / 29% … 2.5%70% / 38% / 34% … 3.0%80% / 48% / 42% … 3.5%
Services pre-depreciation margin37.0%43.0%45.3%
Cloud pre-depreciation margin, now → 203040.0% → 40.0%46.0% → 48.0%48.5% → 52.0%
Group-level costs, % revenue5.0%4.5%4.0%
2027 capex$230bn$250bn$270bn
Terminal capex / revenue (2032)12%15%16%
Return on new capital, terminal15%24%32%
WACC / terminal growth9.75% / 3.0%9.75% / 3.0%9.75% / 3.0%

Cloud margins in Base use the TTM level, not the FY2024–25 level. Cloud is scaling, and its margin rose each year from FY2022 to TTM. The Base return on new capital, 24%, equals the measured incremental ROIC from FY2023 to TTM (section 09). Growth fades in a straight line from 2027 to 2035. All forecast inputs are our assumptions, not company guidance.

Plausibility. Tangible book is $45.22 per share. The Bear value is 2.3× tangible book, above the 0.5× floor that would need proof.

07 — RESEARCH NOTE

Valuation: sum of the parts.

Central value $188.82 per share. Services carries 62% of it and Cloud 39%.

Component, $ per shareBearBaseBull
Search, YouTube and other Services$74.59$116.88$142.27
Cloud$35.28$73.58$138.77
Alphabet-level costs (explicit years)−$19.51−$21.38−$23.29
Other Bets−$2.93$0.00$5.13
Net cash and investments$16.49$19.74$21.35
Total$103.93$188.82$284.23
Output, $bnBearBaseBull
PV of explicit cash flows, H2 2026–2035$224.5bn$493.9bn$748.5bn
PV of terminal value$885.5bn$1,583.0bn$2,417.7bn
Terminal share of operating value80%76%76%
Operating value$1,110.0bn$2,076.9bn$3,166.2bn
Net cash and investments$202.6bn$242.5bn$262.2bn
Other Bets−$36.0bn$0.0bn$63.0bn
Equity value$1,276.6bn$2,319.4bn$3,491.4bn
Per share$103.93$188.82$284.23
Price vs value218.5% above75.3% above16.4% above
FCFt = Σsegments revenue × pre-depreciation margin − group costs − depreciation, × (1 − tax), + depreciation − capex − Δ working capital
Terminal value = NOPAT2036 × (1 − g / RONIC) / (WACC − g); equity = operating value + net cash and investments + Other Bets

Cash flows sit at mid-year and are discounted to 21 October 2026. H2 2026 is the only 2026 flow; H1 is in the 30 June balance sheet. The segment split allocates capex and depreciation by the 50/45/5 assumption; the total does not depend on it. Group AI research cost in the terminal value is spread across segments by their contribution.

YearRevenueCloudCapexDepreciationEBIT marginFCF
2026$490bn$101bn$119bn$30bn32.8%−$32bn (H2)
2027$567bn$139bn$250bn$53bn30.0%−$55bn
2028$652bn$185bn$250bn$79bn27.6%−$25bn
2029$745bn$240bn$242bn$105bn25.9%$17bn
2030$842bn$299bn$224bn$120bn26.1%$68bn
2031$939bn$361bn$195bn$130bn26.6%$131bn
2032$1,030bn$419bn$154bn$135bn27.4%$203bn
2033$1,108bn$468bn$166bn$138bn28.1%$217bn
2034$1,167bn$503bn$175bn$142bn28.5%$229bn
2035$1,202bn$518bn$180bn$146bn28.5%$236bn

Central path, calculated by us. 2026 revenue includes reported H1; the 2026 EBIT margin and FCF are for H2 only.

08 — RESEARCH NOTE

Reverse DCF: what the price requires.

At central margins, capex and WACC, the $330.95 price requires revenue to grow 17.5% a year from FY2025 to 2035. The central path has 11.6%.

Solve k: value(Base growth path × k) = $330.95; k = 1.475; implied 2025–35 revenue CAGR = (revenue2035 / 402.8)1/10 − 1 = 17.5%

That growth would take revenue from $403bn in FY2025 to about $2,023bn in 2035. Alternatively, the price fits central operations at a discount rate of 7.13%, below the dated cost of equity of 9.89%.S24

Implied 10-year revenue CAGR: WACC × Services pre-depreciation margin

WACC \ margin39%41%43%45%47%
8.75%16.3%15.8%15.4%15.0%14.6%
9.25%17.3%16.9%16.5%16.1%15.7%
9.75%18.3%17.9%17.5%17.1%16.7%
10.25%19.3%18.9%18.5%18.1%17.7%
10.75%20.2%19.8%19.4%19.0%18.7%

Central value per share: WACC × terminal growth

WACC \ g2.0%2.5%3.0%3.5%4.0%
8.75%$207.74$216.81$227.41$239.97$255.11
9.25%$190.70$198.05$206.52$216.42$228.14
9.75%$175.96$181.97$188.82$196.73$205.96
10.25%$163.10$168.05$173.65$180.04$187.41
10.75%$151.78$155.90$160.51$165.73$171.68

No cell of the value matrix reaches the price. The highest cell, WACC 8.75% and growth 4.0%, gives $255.11. The growth rate matters more than the margin: each margin step changes the implied CAGR by under half a point.

09 — RESEARCH NOTE

Faustmann ratio and ROIC: shown, not used.

For a multi-segment group these are screens, not tests. They are shown for comparison with earlier notes. The value comes from the model.

MeasureValueInputs
Faustmann ratio6.53×market value $4,065bn / net worth $622.5bn
Price / tangible book7.32×net worth less goodwill and intangibles $66.9bn
ROIC after tax, TTM32.6%NOPAT $122.5bn / operating invested capital $375.4bn
ROIC ex goodwill and intangibles39.7%same NOPAT / capital less soft assets
ROIC with operating leases31.3%lease liability added to capital; 4% lease interest added back
ROIC FY202345.3%NOPAT $70.0bn / capital $154.3bn
Incremental ROIC, FY2023 → TTM23.8%ΔNOPAT / Δ operating invested capital
WACC9.75%section 05
Faustmann ratio = market value / (invested capital + cash − debt − preferred) = market value / common equity
Operating invested capital = equity + debt − cash and securities − non-marketable securities + deferred tax liability = $375.4bn
Incremental ROIC = (122.5 − 70.0) / (375.4 − 154.3) = 23.8%

NOPAT uses a 17% tax rate for comparability across years. Capital excludes investment stakes, so unrealised gains do not inflate the base.S1S5 ROIC fell from 45.3% to 32.6% because capital grew faster than profit. Part of the new capital is construction in progress that earns nothing yet; the 10-Q does not split it out (Unverified). The incremental return of 23.8% is still well above the 9.75% WACC. The AI build has paid so far. The model’s question is whether the next $450bn earns the same.

Why the Faustmann ratio misleads here. At 6.5× it equals price to book, because net worth reduces to common equity. Book equity holds $76.6bn of unrealised gains on private stakes and $57.8bn of goodwill, about $22.7bn of it from Wiz.S1S6 The ratio says nothing about the cash return on the operating assets.

10 — RESEARCH NOTE

Why the value moved from $103.78.

The earlier note gave $103.78 from 12 × FY2025 EPS less 20%. It was a no-growth multiple with a haircut.

Step$ per shareBasis
Earlier rule: 12 × $10.81 × 0.8$103.78FY2025 diluted EPSS3
No-growth earning power: TTM NOPAT / WACC$102.29$122.5bn / 9.75% / 12.284bn
+ Net cash and investments (base haircuts)$19.74section 04
+ Value of growth in the central path, net of capex$66.79model
+ Other Bets (base)$0.00judgement
= Central value$188.82section 07
Earning power value = 122.5 / 0.0975 / 12.2838 = $102.29

The old multiple of 12× equals an earnings yield of 8.3%. With the 20% cut, it is 9.6×, close to capitalising today’s profit at our WACC. So the two methods agree on earning power. They differ on three items. First, the old rule ignored $243bn of cash and stakes net of debt. Second, it gave zero value to growth; Cloud alone has a $514bn backlog. Third, FY2025 EPS included $1.7bn of other income gains but excluded the H1 2026 profit step; core TTM EPS is $9.98.S2S3

The new method also charges what the old one hid: the capex build. In the central path, FCF is negative until 2029. Growth is worth $66.79 only after that cost.

11 — RESEARCH NOTE

Risks and what would change the value.

RiskMechanismObservableValue effect
Cloud margin at scaleAI capacity is priced near cost to win shareCloud operating margin each quarter (Q2 2026: 35.6%)S255% pre-depreciation margin: $211.29; Bear margins: $103.93
Capex does not fade2027 capex rises again and stays above 15% of revenue2027 capex guidance (Q4 2026 call)Stress: $67.55
Shorter server livesHigher depreciation rate cuts EBITUseful-life note in the 10-KS3Not run separately; rate held at 11.5% terminal
Investment marks reversePrivate and SpaceX marks fallQ3 other incomeBear haircuts: bridge $202.6bn vs $242.5bn
Search share loss to AI assistantsQuery and price erosion in SearchSearch & other growth (Q2: +17%)S2Bear Services path
AntitrustConduct remedies in ad tech; search remedies under appealFinal judgments; appeal rulingsS19S20Not modelled; multiple channel
Dilution$40bn ATM programme; preferred conversionShare count in each 10-QS1RSUs in count: $184.41
RatesHigher 10-year yieldTreasury curveS12WACC −1 point: $227.41

12 — RESEARCH NOTE

Weak signals.

These items are context, not evidence for the value. They do not enter the model.

SignalDetailLevel
AI assistant usageThe company states 950 million monthly active users for its AI assistant app and 22 billion API tokens per minute (Q2 release).S2Issuer statement, not audited
Cloud market sharePress coverage of an industry tracker gives Google 15% of Q2 2026 cloud infrastructure spend, up from 13%; AWS 28%, Microsoft 20%. Tracker release not opened (Unverified).S31S32Level 6
Supply constraintsManagement describes a supply-constrained environment for compute (call reports).S17S18Level 5
Market reactionShares fell about 5% after hours on the Q2 capex raise (press report).S17Level 5

13 — RESEARCH NOTE

Evidence register and limits.

Every financial table states its period and unit. Reported figures keep issuer provenance. The TTM cash flow reconciles to the Q3 2025 10-Q and the FY2025 release.S27S28 Two quote publications confirm the closing price; their feed independence is Unverified. Forecast inputs are judgements.

Same-issuer filings, releases and syndicated copies do not give independent confirmation. Each filing figure was read twice: from the filing text and from the XBRL register.S11

This report contains public company research only. Figures may differ by rounding.

S1
Q2 2026 Form 10-Q

23 Jul 2026 · primary, level 2 · Retrieved 22 October 2026. Segment table (note 14), fair value table and SpaceX restriction (note 3), non-marketable securities, mandatory convertible terms, revenue backlog, purchase commitments, leases not yet commenced, tax rate, cover-page share count at 15 Jul 2026.

S2
Q2 2026 earnings release (Exhibit 99.1)

22 Jul 2026 · primary, level 3 · Retrieved 22 October 2026. Balance sheet, income statement, cash flow, segment results, other income, TTM free cash flow, equity raise of $49.6bn, notes of $20.3bn, preferred and common dividends.

S3
FY2025 Form 10-K

5 Feb 2026 · primary, level 2 · Retrieved 22 October 2026. FY2023–25 segment revenue and operating income; customer concentration statement; useful-life policy.

S4
FY2023 Form 10-K

31 Jan 2024 · primary, level 2 · Retrieved 22 October 2026. FY2021–23 segment revenue and operating income (trough regime).

S5
FY2024 Form 10-K

4 Feb 2025 · primary, level 2 · Retrieved 22 October 2026. Year-end 2023 and 2024 balance sheet for invested capital.

S6
Q1 2026 Form 10-Q

30 Apr 2026 · primary, level 2 · Retrieved 22 October 2026. Wiz acquisition close on 11 Mar 2026; goodwill step-up.

S7
Form 8-K, senior notes

10 Aug 2026 · primary, level 1 · Retrieved 22 October 2026. $25bn senior notes closed on 10 Aug 2026, coupons 4.500%–6.375%, maturities 2028–2066.

S8
Form 8-K, preferred stock terms

5 Jun 2026 · primary, level 1 · Retrieved 22 October 2026. Certificate of designations for Series A and Series B mandatory convertible preferred stock.

S9
Form 8-K, equity offering

4 Jun 2026 · primary, level 1 · Retrieved 22 October 2026. Underwriting agreement for the common and preferred offering; ATM programme.

S10
SEC submissions register, CIK 1652044

retrieved 22 Oct 2026 · regulator, level 1 · Retrieved 22 October 2026. SIC 7370; filing list. No Q3 2026 10-Q on file on 22 Oct 2026.

S11
SEC XBRL company facts

retrieved 22 Oct 2026 · regulator, level 1 · Retrieved 22 October 2026. Annual series 2017–25 for revenue, operating income, SBC, capex, operating cash flow, depreciation; second read of each filing figure.

S12
US Treasury daily par yield curve

21 Oct 2026 · regulator, level 1 · Retrieved 22 October 2026. 10-year par yield 5.13% on 21 Oct 2026.

S13
Implied equity risk premium, US market

1 Oct 2026 · practitioner dataset, level 5 · Retrieved 22 October 2026. Implied ERP 4.20% (trailing 12 months, adjusted payout) on 1 Oct 2026. Single origin.

S14
GOOG historical prices

21 Oct 2026 · market data, level 5 · Retrieved 22 October 2026. Close $330.95 on 21 Oct 2026. Weekly adjusted closes, 5 years, for the beta regression and year-end P/E.

S15
Nasdaq historical quotes, GOOG

21 Oct 2026 · exchange data, level 4 · Retrieved 22 October 2026. Close $330.95 on 21 Oct 2026; matches S14.

S16
S&P 500 index history

21 Oct 2026 · market data, level 5 · Retrieved 22 October 2026. Weekly adjusted closes, 5 years, market leg of the beta regression.

S17
Report of the Q2 2026 call: capex guidance

23 Jul 2026 · secondary, level 5 · Retrieved 22 October 2026. 2026 capex guidance raised to $195–205bn from $180–190bn; 2027 capex to increase significantly.

S18
Q2 2026 call highlights

23 Jul 2026 · secondary, level 5 · Retrieved 22 October 2026. Second report of the same capex guidance and supply-constraint remarks.

S19
Ad tech remedy decision report

2 Sep 2026 · secondary, level 5 · Retrieved 22 October 2026. Court rejects divestiture of the ad exchange; orders conduct remedies; written ruling sealed for redactions. Docket text Unverified (sealed).

S20
Ad tech remedy headline

2 Sep 2026 · secondary, level 5 · Retrieved 22 October 2026. Second report of the same decision.

S21
Waymo funding round report

Feb 2026 · secondary, level 5 · Retrieved 22 October 2026. $16bn raised at a $126bn valuation including new money; Alphabet participates and remains majority holder. Alphabet stake Unverified.

S22
Waymo pre-close report

1 Feb 2026 · secondary, level 5 · Retrieved 22 October 2026. Pre-close figure of about $110bn. Superseded by S21; printed as a conflict, not averaged.

S23
Berkshire Hathaway 1986 shareholder letter

1987 · definition source · Retrieved 22 October 2026. Owner earnings definition: net income plus D&A and non-cash charges less average maintenance capex.

S24
Everything Is a DCF Model

3 Aug 2021 · definition source · Retrieved 22 October 2026. Reverse DCF: solve for the expectations the price implies.

S25
Country default spreads and risk premiums

Jan 2026 · practitioner dataset, level 5 · Retrieved 22 October 2026. No country premium is added: the model uses a US mature-market premium for a global issuer, a stated simplification.

S26
Alphabet investor relations

retrieved 22 Oct 2026 · issuer, level 3 · Retrieved 22 October 2026. Earnings calendar; Q3 2026 date not posted on the retrieval date (Unverified).

S27
Q3 2025 Form 10-Q

30 Oct 2025 · primary, level 2 · Retrieved 22 October 2026. Q3 2025 operating cash flow and capex used in the TTM reconciliation.

S28
FY2025 earnings release filing (8-K)

4 Feb 2026 · primary, level 3 · Retrieved 22 October 2026. Q4 2025 cash flow; second read of FY2025 segment totals.

S29
Earnings date estimate

retrieved 22 Oct 2026 · secondary, level 6 · Retrieved 22 October 2026. Q3 2026 report projected for 28 Oct 2026 after the close; unconfirmed.

S30
10-year yield market quote

21 Oct 2026 · market data, level 5 · Retrieved 22 October 2026. Quote 5.15% on 21 Oct; cross-check of S12 (5.13%). The model uses S12.

S31
Cloud infrastructure market share coverage

2026 · secondary, level 6 · Retrieved 22 October 2026. Industry tracker share figures as reported by press; primary tracker release not opened (Unverified).

S32
Q2 2026 cloud share coverage

2026 · secondary, level 6 · Retrieved 22 October 2026. Q2 2026: AWS 28%, Microsoft 20%, Google 15% of cloud infrastructure spend (13% a year earlier). Aggregator; Unverified.

Levels: 1 regulator, 2 audited filing, 3 earnings release, 4 counterparty or exchange, 5 independent secondary, 6 platform signal. Conclusions rest on levels 1–3.

APPENDIX

Model inputs, forecasts and outputs.

A. Scenario assumptions

AssumptionBearBaseBull
BasisFY2022-23 troughFY2024-25 normalH1 2026 run-rate
Default weight in calculator25%50%25%
Services pre-depreciation margin37.0%43.0%45.3%
Cloud margin, now40.0%46.0%48.5%
Cloud margin, 203040.0%48.0%52.0%
Group costs, % revenue5.0%4.5%4.0%
2027 capex, $bn230250270
Terminal capex / revenue12.0%15.0%16.0%
Terminal depreciation rate11.5%11.5%11.5%
RONIC15.0%24.0%32.0%
Non-marketable haircut30.0%15.0%0.0%
Marketable equity haircut20.0%0.0%0.0%
Other Bets−$2.93 / share$0$5.13 / share
WACC / g9.75% / 3.0%9.75% / 3.0%9.75% / 3.0%

B. Annual forecasts, $bn

YearRevenue BearRevenue BaseRevenue BullFCF BearFCF BaseFCF Bull
2026$476bn$490bn$498bn−$50bn−$32bn−$22bn
2027$532bn$567bn$596bn−$77bn−$55bn−$51bn
2028$592bn$652bn$709bn−$47bn−$25bn−$18bn
2029$657bn$745bn$838bn−$10bn$17bn$32bn
2030$724bn$842bn$980bn$33bn$68bn$95bn
2031$789bn$939bn$1,126bn$86bn$131bn$177bn
2032$849bn$1,030bn$1,269bn$144bn$203bn$274bn
2033$901bn$1,108bn$1,393bn$152bn$217bn$300bn
2034$940bn$1,167bn$1,488bn$157bn$229bn$321bn
2035$963bn$1,202bn$1,540bn$161bn$236bn$334bn

C. Valuation outputs

CaseValue / sharePrice vs valueTerminal share
Bear$103.93218.5% above80%
Base$188.8275.3% above76%
Bull$284.2316.4% above76%
Stress (outside weights)$67.55389.9% above—

D. Base inputs and provenance

InputValueLabelSource
Revenue FY2025$402.836bnreportedS3
Revenue H1 2026$229.692bnreportedS1
Operating income TTM$147.628bncalculatedS1, S3
Depreciation TTM$25.237bncalculatedS2, S3
Capex TTM$132.402bncalculated; matches company TTM $132.402bnS2, S27, S28
Operating cash flow TTM$185.675bncalculated; matches company TTM $185.675bnS2
SBC TTM$28.147bncalculatedS2, S3
Net PP&E 30 Jun 2026$321.212bnreportedS2
Cash and debt securities$155.411bnreported (sum)S1
Marketable equity$101.189bnreported (sum)S1
Non-marketable securities$131.461bnreportedS2
Debt$100.164bnreported (sum)S2, S11
Deferred tax liability$22.819bnreportedS2
Shares (incl. preferred conversion)12.2838bncalculatedS1
10-year Treasury5.13%regulator, 21 Oct 2026S12
Implied ERP4.20%dataset, 1 Oct 2026S13
Price$330.95market, 21 Oct 2026S14, S15

E. Sensitivities on the central value

ChangeValue / share
Central$188.82
WACC −1 point$227.41
Depreciation split 30/65 (Services/Cloud)$199.72
Cloud pre-depreciation margin 55%$211.29
Terminal capex 12% of revenue$202.36
No haircut on non-marketable stakes$190.43
Unvested RSUs in share count$184.41
Services margin at TTM 45.3%$199.80
Preferred at minimum conversion rate$188.99