QS Research · Michael Burry's Scion Capital analyst template · 2006
Alphabet Inc. (GOOGL)
As of 2026-11-08 · 12/15 boxes filled from SEC filings and market data
Conclusion: WATCH
Conviction medium · base case none · downside -22% · upside +30%
The market is reacting to the GAAP EPS drop and AI-capex/FCF squeeze, but Q3 2026 operating income still rose 30% and Google Cloud grew 103% with a $561B backlog; the operating business is not deteriorating. However, at 18.3x TTM EV/EBITDA and 21.6x EV/EBIT, with TTM FCF of only $19.75B and a 0.6% FCF yield, today's price already capitalizes much of that strength, so the base case at today's multiple is roughly flat. A 14x TTM EBITDA downside is about -22% (~$221) and a 24x TTM EBITDA upside about +30% (~$370), a 1.3:1 risk/reward that does not meet the long rule. This is a watch: the catalysts are Cloud backlog conversion and capex normalization, while the main risks are AI-spend digestion, regulation and continued heavy capital raising.
Key numbers
- Share price: $284.78
- Market cap: $3,522.16B
- Latest financial period: TTM to Sep 30, 2026
- Revenue (TTM): $471.10B
- EV / EBITDA (TTM): 18.3x
- P/E (TTM): 15.0x
- Price / book: 5.20x
The 15 boxes
- ✓ 1. Long-form business notes
Alphabet is still an advertising business at its core—Google Services sells performance and brand ads on Search, YouTube and Network partner sites—but the FY2025 10-K shows it has added a subscription/platform/device revenue stack, a consumption- and subscription-priced Google Cloud that is now sold on AI infrastructure and Gemini, and a separately reported Alphabet-level AI research arm. Scale over the window in the XBRL data is large: revenue $402.84B in FY2025 versus $182.53B in FY2020, operating income $129.04B versus $41.22B, funded by operating cash flow of $164.71B in FY2025. The mix of cash use has shifted toward capex ($91.45B in FY2025 versus $22.28B in FY2020) while buybacks fell to $45.71B in FY2025 from $62.22B in FY2024.
- ✓ 2. Competitive advantage
The record says the advantage is real but concentrated: operating income went from $41.22B (FY2020) to $129.04B (FY2025) and operating cash flow from $65.12B to $164.71B, and that cash funds a capex line that rose from $22.28B to $91.45B over the same years. The 10-K itself puts more than 70% of 2025 revenue in online advertising and lists competitors in every line of business, and it concedes users are "literally one click away," so the moat is scale, brand and infrastructure rather than user switching costs. Two things erode it in the filings: a December 2025 US antitrust final judgment restricting how it distributes services and requiring it to share search data with competitors, and a newly flagged constraint that scaling technical infrastructure is limited by power, water, land and a small number of qualified AI-chip suppliers.
- ✓ 3. 10-Q takeaways
Q3 2026 was an operating beat with a headline net-income decline: revenue rose 25% to $127.577B (25% constant currency), operating income rose 30% to $40.576B and operating margin was 32% (31.8% per the release), led by Google Cloud at $30.709B (+103%). Net income to common fell 25% to $26.170B and EPS to $2.12 only because OI&E swung to $(8.221)B from $12.759B on unrealized equity-securities losses (largely SpaceX) — a mark-to-market item, not operations. Cash generation stayed strong (Q3 operating cash flow $42.3B; nine-month $127.149B) but capex ran ahead of it ($51.4B in Q3; $132.0B for nine months), funded with heavy debt and equity issuance. Neither the 10-Q nor the Oct 28 release gives numeric revenue or EPS guidance; the only forward-looking statement is a significant increase in 2026 technical-infrastructure capex.
- ✓ 4. Corporate governance
Filled; members read this box.
- ✓ 5. Overview of the prior 3 years of 8-K filings
Filled; members read this box.
- ✓ 6. Other significant filings
Filled; members read this box.
- ✓ 7. Chronology of significant news and events
Filled; members read this box.
- ✓ 8. Comparables valuation interpretation
Filled; members read this box.
- ✓ 9. Insider trading interpretation
Filled; members read this box.
- ○ 10. Earnings-call notes
- ○ 11. Impression of the shareholder letter
- ○ 12. Scuttlebutt overview
- ✓ 13. Valuation and risk/reward summary
Filled; members read this box.
- ✓ 14. Current price suppression and potential catalysts
Filled; members read this box.
- ✓ 15. Conclusions
The call above.
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