Glaring Market Hypocrisy Gifted Us Wildly Discounted Alphabet, So Buy

Alex Sirois

Tue, August 4, 2026 at 7:33 PM GMT+3 4 min read

Quick Read

Alphabet fell 7% after posting a 199% EPS beat and 24% revenue growth, handing buyers a discounted entry into a compounding mega-cap.
MSFT and AMZN surged on similar AI spending news while GOOGL dropped, despite Google Cloud growing 82% year over year, a pace faster than either rival.
GOOGL trades at a P/E near 16 with a PEG under 1 and a $514 billion Cloud backlog, making it the cheapest entry into the AI infrastructure buildout.
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I keep buying Alphabet (NASDAQ:GOOGL) every time Wall Street throws a fit over its AI spending, and the July earnings reaction was the loudest invitation yet. The company posted a 199.41% EPS beat, 24% revenue growth, and Cloud accelerating to 82% year over year. The stock fell 7.13% that day. I added the next morning, and I would do it again.

achinthamb / Shutterstock.com

The Hypocrisy That Gave Me the Entry

Here is what pulls me back to the buy button: the market cheered when other hyperscalers announced record AI CapEx, then punished Alphabet for doing the same thing with better numbers underneath. Microsoft soared and Amazon surged 15% on their earnings reports while Alphabet slid on a blowout quarter. That is straightforward mispricing.

The math backs me up. GOOGL trades at a P/E near 16, an earnings yield of 6.33%, and a free cash flow yield of 3.51%, on a business compounding revenue in the mid-20s. PEG sits at 0.965. A mega-cap growing revenue at 24% earns a market-plus multiple, and I am happy to buy it at a discount.

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Cloud Is No Longer the Number Three Story

Google Cloud did $24.8 billion in Q2 at 82% growth, with operating margin expanding from 20.7% to 35.6% year over year. Backlog reached $514 billion, up more than $50 billion sequentially. CFO Anat Ashkenazi said the company expects to "recognize just over 50% of the total backlog as revenue over the next 24 months." That is contracted, visible growth.

Under the hood, nearly 90% of the Fortune 100 use Gemini Enterprise, the Gemini App has 950 million monthly active users, and the API processes 22 billion tokens per minute. The Ironwood TPU stack means Alphabet owns its silicon, its models, and its distribution. That is a moat you cannot rent.

Why Not Microsoft or Amazon?

I own the other two through index funds and I respect them. I refuse to pay their premium here. Amazon (NASDAQ:AMZN) is guiding to $127.55 billion of 2026 CapEx against Alphabet's $92.9 billion, and the market treated its report as bullish. Microsoft (NASDAQ:MSFT) is spending a projected $95.99 billion on the same buildout and got applause too. Alphabet, growing Cloud faster than either at 82%, got sold. I would rather buy the cheapest ticket to the same show.

The Risk I Am Not Ignoring

Free cash flow went negative in Q2 at -$5.9 billion, long-term debt more than doubled to $98.2 billion, and full-year CapEx guidance was raised to $195 billion to $205 billion. Buybacks are paused. If AI monetization stalls, this spending stings. What keeps me buying is the balance sheet behind it: debt-to-equity of 0.14, interest coverage of 903x, and ROIC of 29.6%. Sundar Pichai told analysts "over the past year, we've gotten more bullish on the opportunities ahead." I believe him because the customer roster proves it.

Why the Buy Button Stays Active

The dividend was raised 5% to $0.22 quarterly. Analysts carry a $426.95 target with 58 buys and zero sells. The yield is a bonus. I am buying a compounder that Wall Street briefly forgot how to price, and the next time it throws this tantrum, I will be adding again.