GOOGL is a high-conviction long-term buying opportunity and looks undervalued at a 22 forward P/E, with DCF fair value 373 versus 346; but before the October 28, 2026 investor update, downside risks outweigh upside, so wait until after results to add, while existing holders need not sell.

The earnings results of Alphabet, Amazon, MetaPlatforms, and Microsoft are among the results I am most eagerly looking forward to seeing.

I have owned shares in Alphabet in my investment portfolio for several years. I have rated Alphabet stock as a buy opportunity and have covered news about this company extensively in recent years.

Investors are asking me if Alphabet stock represents a buying opportunity ahead of this major investor update. I will answer this question in this video.

Well, Alphabet recently announced its quarterly results on July 22, with its quarterly revenue rising by 24%.

Alphabet was clearly halfway between them. Google's services revenue rose by 15% to $94.5 billion. Do you remember two years ago when everyone was afraid that big language models would destroy Google's search business, causing Alphabet's stock price to crash?

I have prepared several videos highlighting that this was a great buying opportunity.

Alphabet's Google services sector is not out of danger yet. The major linguistic patterns, the way people consume information, and the way they search are constantly changing. So, this sector is still under threat and I think investors have become more complacent than they should be, haven't they?

A few years ago, when everyone was afraid of being defeated in that category, I felt they were being overly anxious. Now I feel they have become too complacent. Therefore, I think this is the sector that I will be watching closely to see if any disruption has started to occur in Google search activity.

Meanwhile, Google's cloud business is booming. This is where the bulk of the company’s investments in artificial intelligence go, and they have seen remarkable acceleration as revenues grew by 82% to reach $24.8 billion.

These are the kind of numbers you want to see when a company accelerates its investments by such a large amount. You need to see what justifies those investments. You want to know why the management is so enthusiastic.

Why are you spending all this money? Okay, here's the answer. There is a data point you can look at and say, "Okay, I understand why you are so optimistic about this category."

Its operating income increased by 30% and its operating profit margin expanded to 34%.

This is interesting because of the way AI investments are classified. These funds first leave the company as cash flow expenditures, as capital expenditures, and then later appear on the income statement as depreciation and amortization.

So, we are now seeing a lot of capital expenditures, and starting now, and probably over the next few quarters, we will start to see an acceleration in depreciation expenditures, which we are already beginning to notice.

Therefore, you want to see revenue growth sustained at these levels so that it can offset the increasing depreciation expenses, as well as the increasing expenses on talent and research and development that Alphabet must combine with the hardware to deliver a comprehensive offering to customers.

Other revenues reflected a net profit of $98 billion, mainly due to unrealized gains on its securities. I believe Alphabet is an investor in SpaceX. SpaceX's valuation jumped dramatically when it went public earlier this year.

As an Alphabet shareholder, I hope they sell a lot of the shares they own in SpaceX. I think it's ridiculously overvalued. I would like to see them sell as many of them as possible.

They may be limited in terms of the amount they can sell because of arrangements between them and SpaceX, but I would like to see them divest from this investment. Its value is ridiculously overestimated in my opinion.

Personally, I don't want to be exposed to SpaceX risks as a result of my investment in Alphabet. As a shareholder, if I had a vote, I would vote for Alphabet and encourage the board, the CEO, the CFO, and everyone else to do their best to diversify away from this particular investment.

So, Alphabet's large-scale language model is not at the forefront of leadership in terms of this technology. As you know, Anthropic and OpenAI are competing at the front, but Alphabet is not far behind. They are in a close third place.

Gemini models, according to their latest update, process 22 billion codebases (Tekken) per minute. The Gemini app has 950 million monthly active users. I wouldn't be surprised when they come back and report back to investors if that number jumps to more than one billion monthly active users.

This works well for Alphabet because of its relationship with consumers. Alphabet owns six other products with more than one billion monthly active users, including YouTube, Google Search, Gmail, Google Maps, and others.

Therefore, they can integrate artificial intelligence into their diverse consumer products, enhancing the performance of all those products.

One interesting thing I've noticed about Alphabet compared to Meta Platforms is that Alphabet experienced a slight hiring surge in the three months ending June 30. They now have 198,900 employees compared to 187,000 at the same time last year.

This is an increase of approximately 12,000 employees compared to Meta Platforms, which saw a 1% decrease in the number of employees during the same period.

Therefore, Meta Platforms generated more revenue than Alphabet in its last quarter, and had fewer employees. That was really impressive to me, while Alphabet achieved revenue growth of 24%, which is 4% slower than Meta, and they had to hire an additional 12,000 employees to achieve that goal.

Something to keep in mind, and it is one of the reasons why I mentioned that I prefer MetaPlatforms stock to Alphabet stock for most of this year, indeed all of this year.

Capital structure and cash needs have become increasingly important due to the amount of money Alphabet is spending on capital expenditures for data centers. In June 2026, they issued Class A, Class C and mandatory convertible preferred shares, with total net proceeds of $49.6 billion.

In addition, they entered into a share distribution agreement with certain sales agents to sell up to $40 billion of Class A and Class C shares. In other words, 89, or approximately $90 billion, of shares they sold to the public to obtain $90 billion to spend on artificial intelligence.

This is because they spend so much in this category that it reaches and even exceeds their cash flow from operations. They are approaching the category of negative free cash flow.

I would like to see a greater balance between spending and the amount of cash flow they generate, and I want to hear more about the management team, and I hope they don't issue any more shares.

I don't want to see them issue any more shares. In fact, if you need liquidity, I'll say it again, sell those SpaceX shares; If you need billions of dollars to invest in artificial intelligence, sell your shares in SpaceX and use that capital for your internal funding needs.

Do not issue any more Google shares. You sell shares in Alphabet and Google, which I feel are undervalued, and then hold onto shares in SpaceX, which I feel are ridiculously overvalued.

This is not a decision I can support if the administration actually continues to make this type of decision.

They also issued $20 billion in unsecured bonds to major lenders. I agree with this because they can borrow at relatively low interest rates. So, if they wanted to borrow more money to fund the construction of AI data centers, and they could borrow at the same rates they had previously obtained, which I see as Alphabet's after-tax debt cost being between 5 and 7 percent, it's still really attractive, and I think they were able to borrow at an after-tax debt cost even lower than the levels I just mentioned.

Therefore, I think these are attractive borrowing rates that they can then use in artificial intelligence. I would prefer that they do that instead of selling more shares. I don't want to see them sell more shares because I believe their shares are undervalued.

When I feel that the company's shares are undervalued, I don't want to see them sell and dilute shareholders' stakes. The best way to see them is to buy back shares, or borrow money at relatively low interest rates to buy back shares, or if they have shares in other companies like SpaceX, sell stakes in them to raise capital and allocate it to the categories that generate better returns on invested capital for shareholders.

Therefore, these two numbers will be among the most important numbers to monitor. Their cash flow from operating activities in the recently ended quarter was 39 billion, compared to their purchases of property and equipment in the same quarter of 44.9 billion.

You can see the difference there, which is negative about $5.9 billion. I don't want to see that gap widen any more than necessary. I don't want to see this reach around -15 billion in the next quarter or -25 billion.

I don't want to see that happen. On the contrary, I would like to see it get even smaller. If you want to spend more on property and equipment, I'm okay with that as long as your cash flow from operations also increases at the same rate.

So, if your cash flow from operations increases to 50 billion and you want to spend 50 billion, do it all, right? But I don't want to see that number in the negative because that increases the risk of them needing to sell shares to finance that expansion.

If I didn't feel that they were going to issue more shares and I was confident in their ability to borrow money to build AI data centers, I would have agreed to it. But given that they have shown a willingness to sell $90 billion worth of shares, I don't want to risk further dilution of shareholder stakes while the stock is undervalued.

So, this is a number I will be watching closely.

What is most important to me is the increase in cash flow from operations. That's a jump of about 12 billion compared to the same period last year. I want to see that again, another good jump.

That's an increase of approximately 33%. I want to see this kind of increase again. If their cash flow from operations grows by 30% or more, I would accept an increase in their investment in this AI category because it delivers amazing results and huge returns on investment.

I stated that I believe Alphabet's shares are either undervalued or overvalued. I can listen to the arguments in both cases. Based on a forward price-to-earnings ratio of 22, I think it's undervalued, don't you think?

Revenue growth rate 24% and cash flow from operations growing by 30% or more. Competitive advantages are accelerating, and it is a leading player, perhaps not in first or second place in artificial intelligence, but certainly in third place at least, and in some categories you could say it is in second place.

It's certainly not number one in artificial intelligence, but it's at the forefront, isn't it? They fight and they do so in a way that leads to increases in their cash flow and increases in their profits.

They do not invest as aggressively as Anthropic and OpenAI, where their profits are negative and they burn through tens of billions of dollars annually, raising questions about the sustainability of their business model.

They are investing in artificial intelligence more responsibly, and they are still competing with those two other companies that are investing very heavily. So, I think this is a good position for Alphabet.

For this reason, I believe that stocks are undervalued using this metric.

And when measured using my discounted cash flow model, which I just updated today. I calculated a fair value of 373. The current market price is 346. That's an 8% difference in favor of an undervalued valuation, but that's within my margin of safety.

Therefore, you could say it is valued at its fair value, or slightly undervalued. I certainly wouldn't say it's overvalued or even slightly overvalued. Therefore, in this situation, I don't want to see management selling shares.

I am certainly not interested in selling my shares at these levels.

So, do I think Alphabet stock represents a buying opportunity before investors update? I am definitely not interested in buying before investors are updated. I don't see much upside potential here for Alphabet in the upcoming earnings release.

I mean, there is upside potential, but what I really mean is that I see more downside risks than upside opportunities. There are many things that Alphabet could say and announce that could lead to a significant drop in the value of its shares.

On the other hand, I don't think there's much Alphabet could do or announce to generate similar gains to this announcement. Also, since I already own shares, I am not interested in buying beforehand because I already benefit from any upswing.

If the stocks rise, I already own shares, so I benefit from this rise. Therefore, I would like to reduce my risk towards this event as well. I advise everyone watching to do the same thing.

If you already own Alphabet shares and want to add more, I advise you to wait until after the investor update. In this way, you can reduce the risk of loss. You already own the shares, and you are already benefiting from any rise. I will make sure to keep my downside risk low.

Remember that this will be one of the most anticipated earnings events of the entire earnings season. There are many question marks surrounding artificial intelligence. I will be broadcasting live at approximately 1:15 PM Pacific Time on October 28, 2026 to cover these results, but the event will be exclusive to channel members.

If you are interested in attending, and we would be delighted to have you join, the more the merrier, click on the Join button below and get channel membership. You can start with as little as $5 a month and join this live earnings event.

One more reminder, I see Alphabet stock as a long-term buying opportunity, and I have a high level of conviction and confidence that it is an attractive long-term buying opportunity.

Regarding the specific timing of the earnings event, I advise you to wait until they announce their results before buying your stake in Alphabet stock if you are interested in increasing your financial position.