Alphabet Stock Has Soared More Than 70% In 6 Months. Is It Too Late to Buy Shares?

Core Viewpoint - Alphabet's stock performance and growth in cloud services, particularly driven by AI demand, present a potentially attractive investment opportunity despite significant capital expenditures [1][2][12]. Growth Trends - Alphabet's third-quarter revenue increased by 16% year over year to $102.3 billion, surpassing the 14% growth in Q2 [4]. - Google services revenue grew 14% year over year to $87.1 billion, with notable contributions from Google Search, subscriptions, platforms, devices, and YouTube ads [5]. - Google Cloud revenue surged by 34% year over year to $15.2 billion, building on a 32% growth in Q2, with operating income rising to $3.6 billion from $1.9 billion a year earlier [6]. Backlog and Demand - Google Cloud's backlog reached $155 billion, reflecting a 46% sequential increase and an 82% year-over-year growth [7]. - The demand for AI is not only driven by external customers but also from within Alphabet's operations, with significant user engagement in AI features like Google Search and the Gemini app [11]. Capital Expenditures - Alphabet's capital expenditures in Q3 were approximately $24 billion, up from $13.1 billion in the same quarter last year, with a revised outlook for 2025 capital spending between $91 billion and $93 billion [8][9]. - The majority of this spending is directed towards technical infrastructure to support the growing demand for AI [9]. Valuation Considerations - Alphabet's current price-to-earnings ratio is around 32, with a forward ratio of 29, suggesting that while shares are not cheap, they may still represent a good entry point for investors [13].