$GOOGL · Ale's World of Stocks · 2026-11-01

In any case, this now leads us to our third and final stock for today, which is our least risky option. This company is not only one of the largest and most powerful companies on Earth, but after announcing its earnings this week, it is experiencing one of those rare dips that are always worth taking advantage of.

It is the internet technology giant, Google, and its trading symbol is (GOOGL).

Now, looking at the stock chart, we see how harsh the sell-off was after the earnings announcement, causing the stock to drop by about 20% in the last month alone. Again, this is a stock that rarely falls in the base, but when it does, as it is now, down more than 30% from its highs, it is one of those opportunities that you really should take advantage of.

We are talking about hundreds of billions of dollars that have completely vanished from the market value within days.

So, what caused all this panic on Wall Street? Well, it all comes down to two headlines that sent short-term traders into complete panic. The first headline was a 26% year-on-year decline in earnings per share according to Generally Accepted Accounting Principles (GAAP EPS), which also fell short of analysts' estimates.

The second headline is that Google's free cash flow has turned red, losing more than $9 billion in the quarter, while its capital expenditures have skyrocketed to $51.4 billion in just three months, as it raises its AI spending target for 2026 to around $200 billion in total.

This is obviously a huge amount. I am not trying to downplay any of that. We are talking here about huge fluctuations in terms of massive spending, large cash consumption, and also declining profits.

But here again, as long-term investors, you must be able to look beyond the superficial headlines. Because when you delve into the operational details, you realize that much of this is not what it seems at all.

Because, first and foremost, that decline in earnings per share had little to do with Google's actual day-to-day business operations. It was literally just an unrealized book loss on their foreign investments.

Look, Google has stakes in other technology companies such as SpaceX, for example. Because some of those shares declined during the quarter, accounting rules forced Google to record an $8.2 billion loss on paper.

When you compare that to a massive $12.8 billion gain in the same quarter last year, yes, you end up with this almost artificial book volatility of $21 billion, which makes their financial results look pretty bad, plain and simple.

But listen to this, their core operating income actually rose 30% year-over-year to more than $40.5 billion. Total revenue also jumped by 25% to more than 127.5 billion for just one quarter.

This is an amazing performance. In fact, without that volatility in investments, their net core income would have also grown by 35%.

Now, the second headline should be that the biggest concern, in my opinion, is negative free cash flow. But even here, I understand that all this capital expenditure seems outwardly terrifying, but in reality it is not just liquidity being wasted to keep a haphazard business from collapsing completely.

Instead, Google is a profit-making machine. It is one of the best companies in the world in this field, having generated more than $42 billion in net cash from operations in the past three months alone.

Therefore, the only reason free cash flow is negative is that management intentionally reinvests every dollar it earns, and even more, directly into physical data centers and custom chips that make Google an incredible business to hold for the long term.

In fact, the demand for their AI computers is so enormous that their order book has literally ballooned to more than half a trillion dollars. In other words, companies cannot be satisfied with what Google offers.

Therefore, this spending is really necessary at this stage if you want to be able to meet all those huge demands.

Frankly, I would like to ask the pessimists: What would you have asked Google to do in this scenario? If companies wanted to pay you more than half a trillion dollars for any service you provide, would you tell me you would refuse all those requests?

Or will you invest in yourself to expand your business sufficiently so that you can actually meet all this demand? It is clear, I think, that anyone with a modicum of sense would choose the latter option in this situation. Well, that's exactly what Google does.

And look, at this point, I think you really can't find any pessimistic narrative that still carries any weight here. I mean, for all those who have been saying for a long time that AI-powered chatbots, for example, will kill Google's search engine.

Look at what all these investments in artificial intelligence have already achieved for them. By integrating artificial intelligence, they succeeded in increasing Google's search revenue by a 12% year-on-year increase. It is extremely important.

So, not only are they being hampered, but they are still growing at insane rates relative to their already dominant size. In fact, Google was not only a market leader, but management also indicated that search queries grew at their fastest rate in more than 5 years. How crazy is this?

As a result, total advertising revenue also increased by 11%. It reached nearly 100 billion in one quarter, while the number of YouTube Music and Premium subscribers exceeded 150 million, and the number of monthly active Gemini users exceeded one billion, processing 32 billion tokens per minute across all their models.

So again, Google is not being held back by artificial intelligence. They actually use it to make the search, and indeed all their products, more appealing, which drives more clicks on ads than ever before. They are stronger than ever.

And this is even without looking at their crown jewel, such as Google Cloud, where all this infrastructure spending will pay off even more. Well, in this quarter, Google Cloud's revenues not only grew, but literally doubled, jumping 103% year-over-year to more than $30 billion.

I mean, this is crazy for what is already the third largest operator in the world.

But what's even crazier, and perhaps stranger, is not how this translates into profits, because the cloud's operating profit has more than tripled from $3.6 billion last year to more than $11.1 billion this quarter, with margins also expanding to 36.2%.

The main driver behind that explosive cloud profitability is Google’s approach to its hardware, namely its internal Tensor Processing Units (TPUs).

Look, unlike other tech giants who have to pay huge sums for Nvidia's graphics processing units, Google is actually designing its own AI silicon chips as well. They can use both.

Because they are now designing their own chips, their chief cloud officer stated that AI data centers powered by these custom chips can now recoup their costs twice as fast as when they had to pay exorbitant prices for graphics processing units like those from Nvidia.

This allows them to compete on price for AI computing, and also allows them to train their own Gemini models and handle the diverse AI demands of their business and company at a fraction of the cost that many competitors might have to pay.

Therefore, it is also a major differentiating factor.

Well, because of all this, Google is now also marketing these chips. They are selling several gigawatts of TPU systems directly to external customers such as Anthropic, a brand-new revenue stream that analysts expect to explode from $3 billion this year to $25 billion next year. This is tremendous growth.

Looking ahead, the outlook remains bright, with analysts predicting sales will reach three-quarters of a trillion dollars in just two years, and operating income rapidly approaching 300 billion as well.

This is not the kind of performance that justifies such a large drop in the share price. In fact, even the lowest analyst price targets for the next 12 months alone would make today's stock price rise by more than double, with analysts also agreeing on a rise exceeding 40%.

According to Yahoo Finance, the rating now has a PEG ratio of only about half of one, which is insanely cheap for a company of this size.

In short: a very cheap price for a search monopoly, a cloud division that is doubling in size with increasing profit margins, an internal chip with enormous future potential, absolute dominance in multiple markets such as YouTube and many others, and still largely the king of digital advertising alongside Meta.

I mean, this is simply one of the most obvious low-price buying opportunities I can find in the entire market right now. So, I really like her.