On The Investor’s Podcast (Ep 838), Daniel Mahncke and Shawn O’Malley explained why they’re less bullish on Alphabet (NASDAQ:GOOGL | GOOGL Price Prediction) stock today vs 2 years ago.
“Google, for the first time since its IPO, reported a quarter of negative cash flows, which is why Google needs to raise all that debt and that equity to still fund CapEx investments,” one of the hosts said. Alphabet remains one of their largest holdings, but they warned that today’s company looks very different from when they bought the stock 18 months ago.
Alphabet’s Free Cash Flow Turned Negative for the First Time
The hosts discussed how Alphabet’s management is guiding to roughly $200 billion in capex this year, with estimates as high as $300 billion for next year. If those figures hold, operating margins could compress from 34-35% today to as low as 20% by 2030.
Alphabet has already raised more than $50 billion in long-term debt and announced it will issue about $85 billion in new shares this year, so “A lot of the stock that was bought back in the last few years is now issued again to fund CapEx, to fund data centers, to fund AI research.” The buyback yield that once made the company attractive has evaporated, with repurchases suspended in Q2 2026.
In Q2 FY2026, Alphabet posted operating cash flow of $39.069 billion against capital expenditures of $44.924 billion, producing free cash flow of -$5.855 billion. Capex doubled year over year, and long-term debt climbed from $46.5 billion to $98.2 billion.
Additionally, the stock trades at over 70 times price to free cash flow, with annualized capex “eating away a significant chunk of cash flows.”
After Doubling His Money on Google, He Wouldn’t Buy More Today
One of the show hosts disclosed that the Google position nearly doubled in value after buying heavily between $150 and $190 per share roughly 1.5 years ago, when investors feared AI disruption and DOJ antitrust action. Now, “I wouldn’t buy Google shares at today’s prices considering the other opportunities.”
His original model pegged fair value at “between $180 and $200 per share,” yet he leaned in anyway: “If you can buy maybe the best business in the history of capitalism for less than 20 times earnings, when they are facing competitive threats, but they have sort of the advantage to be able to, as long as they don’t mess it up, they should be okay. I’m happy to make that bet all day.“
He also argued OpenAI’s approach has backfired: “For OpenAI to try and appeal to the masses and just waste a ton of expensive computing power on things like spaghetti recipes or whatever people look up, I think that has gotten them in real trouble.”
Google Cloud Is Growing 82%, But Cash Flow Just Turned Negative
The hosts noted that Alphabet’s gains reflect genuine fundamental growth. Alphabet’s operating cash flow growth accelerated from 0% in 2022 to nearly 40% today, and Google Cloud growth soared from the low 30% range to more than 80% last quarter. Sundar Pichai said “nearly 90% of the Fortune 100” now use Gemini Enterprise.
One caveat from the recent earnings report: “Operating cash flows in this quarter have been abnormally high just due to the impact of the SpaceX IPO because Google had an equity stake.” He also cautioned that valuation models “almost always reflect varying degrees of the status quo” and can underestimate upside when growth accelerates.
What To Watch Next
Alphabet’s bull and bear cases have rarely been this powerful at the same time. Google Cloud is growing 82%, Gemini adoption is spreading across major enterprises, and operating cash flow growth has accelerated sharply. However, the AI buildout has also eliminated free cash flow, suspended buybacks, and doubled long-term debt. The next phase of Alphabet’s story depends on whether Cloud and Gemini can monetize quickly enough to outrun a capex curve that could reach $300 billion next year.
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