GOOG
GOOG
Hold 2026-04-29
Model
DCF
Price at Report
$347.31
Base IV
$330.79
Bear IV
$147.98
Bull IV
$501.67
Entry Zone: 270-310 · Sell Above: 420
Bore Family Office
Valuation Report — Alphabet Inc (GOOG) • April 29, 2026
Unlevered DCF (FCFF @ WACC) • Discount Rate: 8.50% • Current Price: $347.31
Prepared by Lurch • Bore Family Office • Data: Finnhub, StockAnalysis.com, S&P Global Market Intelligence
🏢 Business Overview
Alphabet Inc (GOOG) is the world's third-largest company by market cap, operating through three segments: Google Services (Search, YouTube, Android, Devices, Subscriptions), Google Cloud (GCP, Workspace, AI platform), and Other Bets (Waymo, Verily). Founded in 1998 by Larry Page and Sergey Brin, Alphabet dominates global search with ~90% market share and is rapidly expanding in cloud infrastructure and AI. Q1 2026 revenue hit $109.9B (+22% YoY), with Cloud surging 63% to $20B and Search growing 19%. The company is in the "Operating Leverage" stage — revenue growing moderately while operating income and FCF expand rapidly as AI investments scale.
| Business Segment | Revenue | % of Total | YoY Growth | Margin | Notes |
|---|---|---|---|---|---|
| Google Services | $365,500M | 91% | +14.0% | — | Search dominance (~90% share), YouTube ads + subs, Android ecosystem |
| Google Cloud | $44,830M | 11% | +30.0% | — | Fastest-growing segment; AI infrastructure, Vertex AI, Workspace; $460B+ backlog |
| Other Bets | $1,680M | 0% | -10.0% | — | Waymo (500K+ weekly rides), Verily — operating losses ~$5.6B/yr |
| Blended Growth Rate | — | 100% | +15.6% | — | Weighted avg across segments |
📊 Business Lifecycle Stage
Stage 1
Startup
Startup
Stage 2
Hyper Growth
Hyper Growth
Stage 3
Self Funding
Self Funding
Stage 4
Operating Leverage
Operating Leverage
Stage 5
Capital Return
Capital Return
Stage 6
Decline
Decline
Stage 4 — Operating Leverage: Revenue growing modestly with profits inflecting rapidly. The classic DCF sweet spot — FCF is reliable, growing, and well-anchored to analyst estimates.
Why this drives model selection: Classic DCF sweet spot — FCF inflecting and growing rapidly.
🔍 Quality Scorecard
| Metric | Value | Assessment |
|---|---|---|
| ROIC | 28.5% | ≥12% strong |
| FCF Margin | 18.2% | ≥10% strong |
| Debt / EBITDA | 0.6x | ≤2x conservative |
| Revenue Trend | Growing 3yr | 3-year directional trend |
| FCF Margin Trend | Contracting | Directional margin trajectory |
✅ Quality profile supports the valuation
📊 Financial Snapshot
| Metric | 2021 | 2022 | 2023 | 2024 | 2025 |
|---|---|---|---|---|---|
| Revenue ($M) | $257,637 | $282,836 | $307,394 | $350,018 | $402,836 |
| Rev YoY Growth | — | +9.8% | +8.7% | +13.9% | +15.1% |
| Gross Margin | 56.9% | 55.4% | 56.6% | 58.2% | 59.7% |
| EBITDA ($M) | $88,987 | $88,317 | $96,239 | $127,701 | $150,175 |
| EBITDA Margin | 34.5% | 31.2% | 31.3% | 36.5% | 37.3% |
| Operating Income ($M) | $78,714 | $74,842 | $84,293 | $112,390 | $129,039 |
| Operating Margin | 30.6% | 26.5% | 27.4% | 32.1% | 32.0% |
| Net Income ($M) | $76,033 | $59,972 | $73,795 | $100,118 | $132,170 |
| Net Margin | 29.5% | 21.2% | 24.0% | 28.6% | 32.8% |
| EPS (diluted) | $5.61 | $4.56 | $5.80 | $8.04 | $10.81 |
| Free Cash Flow ($M) | $67,012 | $60,010 | $69,495 | $72,764 | $73,266 |
| Annual DPS | $0.000 | $0.000 | $0.000 | $0.600 | $0.830 |
| Total Debt ($M) | $26,206 | $27,202 | $24,330 | $22,574 | $59,291 |
💹 Capital Return & Share Count Analysis
Net Share Change
-9.8% (2021→2025)
📉 Net reduction — buybacks exceed issuances
EPS Amplification
EPS grew +92.7% vs net income +73.8% over the period — +18.9pp of EPS growth amplified by share reduction.
| Year | Diluted Shares (M) | YoY Change | Buyback Spend ($M) | Buyback Yield |
|---|---|---|---|---|
| 2021 | 13553.0M | — | $50,274 | 1.1% |
| 2022 | 13159.0M | -2.9% | $59,296 | 1.3% |
| 2023 | 12722.0M | -3.3% | $61,504 | 1.4% |
| 2024 | 12447.0M | -2.2% | $62,222 | 1.4% |
| 2025 | 12230.0M | -1.7% | $45,709 | 1.1% |
Alphabet initiated buybacks in earnest in 2019 and has reduced diluted shares by ~7.5% over 5 years. FY2025 buyback was $45.7B (down from $62.2B in FY2024, partly due to debt issuance for the $32B Wiz acquisition). Dividend initiated in Q2 2024 at $0.20/qtr, raised to $0.21/qtr in 2025. Total shareholder return yield (buyback + dividend) ~3.8%.
📈 DCF Scenarios
$148
🔴 Bear
$331
📊 Base
$502
🚀 Bull
$347.31
Current Price
$358
Analyst Avg PT
| Scenario | Stage 1 (Yrs 1–5) | Stage 2 (Yrs 6–10) | Terminal g | WACC | Intrinsic Value | vs Price |
|---|---|---|---|---|---|---|
| 🔴 Bear | 6.0% | 4.0% | 2.0% | 11.00% | $148 | ▼57.4% |
| 📊 Base | 12.0% | 6.0% | 3.0% | 8.50% | $331 | ▼4.8% |
| 🚀 Bull | 15.0% | 7.0% | 3.2% | 7.50% | $502 | ▲44.4% |
📋 Full 10-Year Projection Tables
Bear Scenario
Stage 1: 6.0% | Stage 2: 4.0% | Terminal: 2.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $138.00B | $124.32B | $124.32B |
| Year 2 ✦ | Stage 1 | $146.00B | $118.50B | $242.82B |
| Year 3 ✦ | Stage 1 | $152.00B | $111.14B | $353.96B |
| Year 4 ✦ | Stage 1 | $158.00B | $104.08B | $458.04B |
| Year 5 ✦ | Stage 1 | $164.00B | $97.33B | $555.37B |
| Year 6 | Stage 2 | $170.56B | $91.19B | $646.56B |
| Year 7 | Stage 2 | $177.38B | $85.44B | $731.99B |
| Year 8 | Stage 2 | $184.48B | $80.05B | $812.04B |
| Year 9 | Stage 2 | $191.86B | $75.00B | $887.05B |
| Year 10 | Stage 2 | $199.53B | $70.27B | $957.32B |
| Terminal | — | TV=$2261.4B | PV(TV)=$796.4B (45% of EV) | EV=$1753.7B |
| Intrinsic Value | — | — | EV $1753.7B − Net Debt → Equity / Shares | $148 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (11.00%) to get its present value. After Year 10, FCF grows at the terminal rate (2.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $2261.4B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $796.4B). Enterprise Value = PV of FCFs ($957.3B) + PV of TV ($796.4B) = $1753.7B. Subtracting net debt gives equity value of $1790.1B, divided by shares outstanding = $148 per share.
Base Scenario
Stage 1: 12.0% | Stage 2: 6.0% | Terminal: 3.0%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $146.00B | $134.56B | $134.56B |
| Year 2 ✦ | Stage 1 | $163.00B | $138.46B | $273.02B |
| Year 3 ✦ | Stage 1 | $183.00B | $143.27B | $416.30B |
| Year 4 ✦ | Stage 1 | $205.00B | $147.92B | $564.22B |
| Year 5 ✦ | Stage 1 | $229.00B | $152.30B | $716.51B |
| Year 6 | Stage 2 | $242.74B | $148.79B | $865.30B |
| Year 7 | Stage 2 | $257.30B | $145.36B | $1010.66B |
| Year 8 | Stage 2 | $272.74B | $142.01B | $1152.67B |
| Year 9 | Stage 2 | $289.11B | $138.74B | $1291.40B |
| Year 10 | Stage 2 | $306.45B | $135.54B | $1426.94B |
| Terminal | — | TV=$5739.0B | PV(TV)=$2538.3B (64% of EV) | EV=$3965.2B |
| Intrinsic Value | — | — | EV $3965.2B − Net Debt → Equity / Shares | $331 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (8.50%) to get its present value. After Year 10, FCF grows at the terminal rate (3.0%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $5739.0B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $2538.3B). Enterprise Value = PV of FCFs ($1426.9B) + PV of TV ($2538.3B) = $3965.2B. Subtracting net debt gives equity value of $4001.6B, divided by shares outstanding = $331 per share.
✦ Year-by-year analyst consensus FCF estimates (Base scenario)
Bull Scenario
Stage 1: 15.0% | Stage 2: 7.0% | Terminal: 3.2%
| Period | Stage | FCFF | PV of FCFF | Cumulative EV |
|---|---|---|---|---|
| Year 1 ✦ | Stage 1 | $150.00B | $139.53B | $139.53B |
| Year 2 ✦ | Stage 1 | $172.00B | $148.84B | $288.37B |
| Year 3 ✦ | Stage 1 | $198.00B | $159.38B | $447.75B |
| Year 4 ✦ | Stage 1 | $228.00B | $170.73B | $618.48B |
| Year 5 ✦ | Stage 1 | $262.00B | $182.50B | $800.98B |
| Year 6 | Stage 2 | $280.34B | $181.65B | $982.63B |
| Year 7 | Stage 2 | $299.96B | $180.80B | $1163.43B |
| Year 8 | Stage 2 | $320.96B | $179.96B | $1343.40B |
| Year 9 | Stage 2 | $343.43B | $179.13B | $1522.52B |
| Year 10 | Stage 2 | $367.47B | $178.29B | $1700.82B |
| Terminal | — | TV=$8927.3B | PV(TV)=$4331.5B (72% of EV) | EV=$6032.3B |
| Intrinsic Value | — | — | EV $6032.3B − Net Debt → Equity / Shares | $502 |
How the price per share is derived: Each year's projected free cash flow is discounted back at WACC (7.50%) to get its present value. After Year 10, FCF grows at the terminal rate (3.2%) in perpetuity — the Gordon Growth formula gives a terminal value of FCF11 / (WACC − gT) = $8927.3B. That terminal value is discounted back 10 years to today's dollars (PV of TV = $4331.5B). Enterprise Value = PV of FCFs ($1700.8B) + PV of TV ($4331.5B) = $6032.3B. Subtracting net debt gives equity value of $6068.7B, divided by shares outstanding = $502 per share.
🔲 Sensitivity Table
| WACC \ gT | 1.5% | 2.0% | 2.5% | 3.0% | 3.5% |
|---|---|---|---|---|---|
| 6.5% | $408 | $440 | $480 | $531 | $600 |
| 7.0% | $368 | $393 | $424 | $462 | $511 |
| 7.5% | $335 | $355 | $379 | $409 | $445 |
| 8.0% | $307 | $324 | $343 | $366 | $394 |
| 8.5% | $283 | $297 | $312 | $331 | $353 |
| 9.0% | $263 | $274 | $287 | $302 | $319 |
| 9.5% | $245 | $254 | $265 | $277 | $292 |
| 10.0% | $229 | $237 | $246 | $256 | $268 |
| 10.5% | $215 | $222 | $229 | $238 | $248 |
Green = >10% above current price. Red = >10% below. Gold = within ±10%.
📉 Long-Term Price Trend Channel
Log-linear trend fitted to full price history. ±1.5σ bands. Green shaded zone = bottom 25% of historical range — historically attractive entry.
🏦 Comparable Valuation
| Company | Ticker | P/E | EV/EBITDA | P/FCF | Div Yield | Notes |
|---|---|---|---|---|---|---|
| Microsoft | MSFT | 35.2x | 26.8x | 38.5x | 0.7% | Cloud + AI leader, comparable moat |
| Apple | AAPL | 33.5x | 27.1x | 32.2x | 0.4% | Ecosystem lock-in, Services growth |
| Meta | META | 26.1x | 19.5x | 27.8x | 0.3% | Ad-driven, AI investment cycle |
| Amazon | AMZN | 34.8x | 24.2x | 55.1x | 0.0% | AWS + retail, high CapEx |
| Alphabet | GOOG | 26.5x | 25.9x | 65.7x | 0.2% | Search moat, Cloud hyper-growth |
| GOOG 5yr avg | — | 25.0x | 20.5x | 42.0x | — | Historical median |
💰 Dividend / Distribution Analysis
| Metric | Value |
|---|---|
| Annual DPS | $0.840 |
| Current Yield | 0.24% |
| Consecutive Growth Years | 2 |
| 1-yr DPS CAGR | +5.0% |
| 3-yr DPS CAGR | N/A |
| 5-yr DPS CAGR | N/A |
| 10-yr DPS CAGR | — |
| Payout Ratio (DPS/EPS) | 6.4% |
| FCF Payout Ratio | 1.1% |
| Sustainability Verdict | Rock Solid — 1.1% FCF payout, enormous coverage |
Alphabet's dividend was initiated in 2024 at $0.80 annualized, raised 5% to $0.84 in 2025. With a 6.4% EPS payout ratio and only 1.1% FCF payout on owner earnings, this dividend is rock solid. FCF coverage is 90x, earnings coverage is 15x. The dividend is a token gesture — buybacks are the primary return mechanism ($45.7B in FY2025). There is enormous room for dividend growth, but management has signaled modest annual increases aligned with earnings growth rather than aggressive yield expansion.
🔮 Analyst Forecast Section
(a) EPS Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $5.61 | — | — | — | Actual |
| 2022 | $4.56 | — | — | — | Actual |
| 2023 | $5.80 | — | — | — | Actual |
| 2024 | $8.04 | — | — | — | Actual |
| 2025 | $10.81 | — | — | — | Actual |
| 2026 | $10.22 | $11.81 | $14.51 | 44 | Estimate |
| 2027 | $10.70 | $13.75 | $16.66 | 39 | Estimate |
(b) Revenue Consensus
| Year | Low / Actual | Avg | High | # Analysts | Type |
|---|---|---|---|---|---|
| 2021 | $257.6B | — | — | — | Actual |
| 2022 | $282.8B | — | — | — | Actual |
| 2023 | $307.4B | — | — | — | Actual |
| 2024 | $350.0B | — | — | — | Actual |
| 2025 | $402.8B | — | — | — | Actual |
| 2026 | $446.9B | $486.6B | $513.0B | 44 | Estimate |
| 2027 | $503.0B | $560.9B | $607.5B | 39 | Estimate |
(c) Individual Analyst Price Targets
| Analyst | Firm | Rating | PT | Upside |
|---|---|---|---|---|
| Brian Pitz | BMO Capital | Buy | $410 | +18.1% |
| Ronald Josey | Citigroup | Strong Buy | $405 | +16.6% |
| Laura Martin | Needham | Strong Buy | $400 | +15.2% |
| Mark Kelley | Stifel | Strong Buy | $387 | +11.4% |
| Andrew Boone | Citizens | Buy | $385 | +10.9% |
| Justin Patterson | KeyBanc | Buy | $380 | +9.4% |
| John Blackledge | TD Cowen | Strong Buy | $375 | +8.0% |
| Stephen Ju | UBS | Hold | $375 | +8.0% |
| Deepak Mathivanan | Cantor Fitzgerald | Buy | $370 | +6.5% |
| Ken Gawrelski | Wells Fargo | Buy | $361 | +3.9% |
| Barton Crockett | Rosenblatt | Hold | $357 | +2.8% |
💡 Investment Thesis
- AI-driven Search moat deepening: Gemini integration driving record query volumes; Search revenue +19% in Q1 2026 despite "Google is dead" narratives. AI Overviews monetizing at similar or better rates than traditional Search.
- Cloud is the new growth engine: 63% revenue growth in Q1 2026, approaching $80B annualized run rate, with $460B+ in remaining performance obligations. Operating margin now 17%+ vs. losses just two years ago — operating leverage inflection.
- Capital return machine: $45.7B in share buybacks FY2025 (3.8% yield), plus new $0.84/yr dividend ($1B/quarter). Diluted shares down ~7.5% over 5 years. FCF well covers capex + buybacks + dividends with room to expand.
- Key risk — antitrust: DOJ remedies (potential Chrome/Android divestiture) could structurally impair the Services moat. This is the single biggest overhang and justifies a higher discount rate than pure tech fundamentals suggest.
- Waymo optionality: 500K+ weekly autonomous rides, still pre-revenue-scale, but represents a multi-trillion TAM option that current valuation barely prices.
👔 Management Quality & Culture
CEO: Larry Page · ★ Founder
⚠️ Key-Person Risk: HIGH
Founder-led company — strategy and culture deeply tied to a single individual. Succession planning is a material risk.
Net Insider Buys (12m)
-8,301,625 shares
Incentive Alignment
⚠️ Moderate
Compensation: Equity-based compensation present · Comp reference: $692M
CEO Background & Track Record
Alphabet Inc. - Wikipedia
On August 11, 2015, Google announced plans to create a new public holding company, Alphabet Inc. Google co-founder and CEO Larry Page made this announcement in a blog post on Google's official blog. Alphabet was created to restructure
On August 11, 2015, Google announced plans to create a new public holding company, Alphabet Inc. Google co-founder and CEO Larry Page made this announcement in a blog post on Google's official blog. Alphabet was created to restructure
Sundar Pichai | Biography, Google, & Facts | Britannica Mone
In 2011 Pichai reportedly was aggressively pursued for employment by microblogging service Twitter, and in 2014 he was touted as a possible CEO for Microsoft, but in both instances he was granted large financial packages to remain with Goog
In 2011 Pichai reportedly was aggressively pursued for employment by microblogging service Twitter, and in 2014 he was touted as a possible CEO for Microsoft, but in both instances he was granted large financial packages to remain with Goog
Sundar Pichai, Alphabet Inc: Profile and Biography - Bloombe
Sundar Pichai is Chief Executive Officer at Alphabet Inc. See Sundar Pichai's compensation, career history, education, & memberships.
Sundar Pichai is Chief Executive Officer at Alphabet Inc. See Sundar Pichai's compensation, career history, education, & memberships.
Capital Allocation & Strategy
FinancialContent - The Sovereign of Silicon: A Deep-Dive int
CEO Sundar Pichai continues to lead with a "steady hand" approach, though his tenure is now defined by the successful integration of Gemini. A major shift occurred in mid-2024 when Anat Ashkenazi took over as CFO,
CEO Sundar Pichai continues to lead with a "steady hand" approach, though his tenure is now defined by the successful integration of Gemini. A major shift occurred in mid-2024 when Anat Ashkenazi took over as CFO,
FinancialContent - Alphabet Inc.: The $4 Trillion Ascent in
Capital Allocation: Alphabet returned over $70 billion to shareholders via buybacks in 2025 and maintained its dividend program initiated in 2024. However, the guided $180 billion CapEx for 2026—triple its 2023 levels—has r
Capital Allocation: Alphabet returned over $70 billion to shareholders via buybacks in 2025 and maintained its dividend program initiated in 2024. However, the guided $180 billion CapEx for 2026—triple its 2023 levels—has r
Employee Ratings
Overall Rating
3.9/5 ★★★★☆
Reviews
,
Culture Signal
Positive
✅ Strengths
- recommend
Employee Review Excerpts
Intrinsic - My best job at Alphabet | Glassdoor
May 2, 2025 · Account executive · Current employee · San Francisco, CA · Recommend · CEO approval · Business Outlook · Pros · Enjoy Alphabet level benefits and it's pretty comfortable · Cons · Byzantine level bureaucracy and it takes e
May 2, 2025 · Account executive · Current employee · San Francisco, CA · Recommend · CEO approval · Business Outlook · Pros · Enjoy Alphabet level benefits and it's pretty comfortable · Cons · Byzantine level bureaucracy and it takes e
Google - Alphabet Inc | Glassdoor
- Widely variable team cultures (some great, some not so great) - Shifts in upper management indicate a gradual shift towards traditional-giant-corporation culture
- Widely variable team cultures (some great, some not so great) - Shifts in upper management indicate a gradual shift towards traditional-giant-corporation culture
Alphabet (GB) Reviews: Pros And Cons of Working At Alphabet
How satisfied are employees working at Alphabet (GB)?72% of Alphabet (GB) employees would recommend working there to a friend based on Glassdoor reviews. Employees also rated Alphabet (GB) 3.9 out of 5 for work life balance, 3.9 for
How satisfied are employees working at Alphabet (GB)?72% of Alphabet (GB) employees would recommend working there to a friend based on Glassdoor reviews. Employees also rated Alphabet (GB) 3.9 out of 5 for work life balance, 3.9 for
Sources: Finnhub insider data · Brave Search (Glassdoor, Indeed, Comparably, news) · Earnings surprise data from analyst forecasts · Qualitative signals are directional only.
⚖️ DCF Verdict: Hold — Alphabet Inc (GOOG)
Current price: $347.31 | Analyst Avg PT: $357.61
$148
🔴 Bear
$331
📊 Base
$502
🚀 Bull
| Tier | Price | Action |
|---|---|---|
| Tier 1 — Starter | ≤$310 | Begin position |
| Tier 2 — Add | ≤$290 | Add on weakness |
| Tier 3 — Full | ≤$270 | Full allocation |
| Sell Alert | ≥$420 | Above fair value — consider trimming |
How tiers are set: Tier 1 = Base IV × 0.92 (8% discount to base case). Tier 2 = midpoint of Bear & Base IV (building on meaningful weakness). Tier 3 = Bear IV × 1.05 (just above worst-case — maximum margin of safety). Sell alert = Bull IV × 0.85 (15% discount to bull case — above fair value range).
Verdict: Hold. At $347, GOOG trades near analyst consensus ($358) and close to our base-case intrinsic value of $331. The stock is fairly valued — not cheap, not expensive. The bull case is compelling (AI monetization, Cloud hyper-growth, Waymo optionality), but antitrust overhang and elevated CapEx create real downside risk. With shares already held at $181 cost basis (~92% unrealized gain), there's no urgency to add at these levels. Starter tier at $310 or below; add on weakness toward $290; full allocation at $270 or below. Sell discipline above $420 (near bull case).
📂 Current Position Summary
| Metric | Value |
|---|---|
| Shares Held | 560 |
| Average Cost Basis | $181.34 |
| Current Market Value | $194,494 |
| Unrealized P&L | $+92,943 (+91.5%) |
| Annual DPS | $0.840/yr |
| Annual Dividend Income | $470/yr |
| Current Yield (at price) | 0.24% |
| Yield on Cost | 0.46% |
| vs Target (~$200K) | $194,494 / $200,000 (97%) |
🔧 Model Notes & Calibration
| Assumption | Rationale / Notes |
|---|---|
| FCF Base — Owner Earnings Approach | Used Owner Earnings of $130B as the FCF base, not reported FY2025 FCF of $73.3B. FY2025 CapEx surged to $91.4B (22.7% of revenue) for AI infrastructure — well above the maintenance level of ~$35B. Operating cash flow of $164.7B less maintenance CapEx of ~$35B yields $130B in true earning power. Reported FCF understates GOOG's cash generation because growth CapEx (AI data centers, Cloud infrastructure) is treated as an operating expense in the DCF but represents discretionary investment that could be scaled back if needed. This approach is standard for mega-cap tech during CapEx cycles (see: AMZN 2015-2020, META 2022-2023). |
| WACC — 8.5% Base | Base WACC of 8.5% reflects GOOG's exceptional business quality: 90% Search market share, 28.5% ROIC, net cash balance sheet, and 32%+ operating margins. Raw CAPM with β=1.13 yields ~10.4%, but forward-looking beta for a $4.2T company with Search dominance should be lower (~0.90-1.05). We use an effective β of ~0.95 for the base case, resulting in Ke ≈ 9.5% and WACC ≈ 8.5%. The 250bp WACC spread in the bear case captures antitrust risk; the 100bp reduction in bull captures reduced uncertainty. |
| Sanity Check — Calibrated to Consensus | Base IV of $331 is -7.5% below analyst consensus PT of $358, within the ±20% threshold. The DCF produces a lower value than market price ($347), which reflects the market pricing in significant AI optionality and Search moat durability that our base case does not fully capture. The bull case at $501 represents full AI monetization and antitrust resolution. P/FCF of 65x on reported FCF looks extreme but normalizes to ~35x on owner earnings — in line with MSFT at 38.5x and more reasonable than it appears. |
| CapEx Normalization Assumption | A critical assumption: FY2025 CapEx of $91.4B is a cyclical peak driven by AI infrastructure buildout. We assume CapEx normalizes to ~$55-65B by FY2027-28, driving FCF margin expansion from 18% to 25%+. If CapEx remains structurally elevated, the bear case ($155) becomes more likely. Management has signaled CapEx will remain elevated in the near term but has not committed to the current run rate indefinitely. |
| Antitrust Discount | The DOJ antitrust case (Chrome/Android divestiture risk) is the key variable not in the DCF. The bear case WACC premium of +250bp partially captures this risk, but a forced divestiture of Chrome or Android would require a separate SOTP analysis. This is why the verdict is Hold rather than Accumulate at current levels. The $190 analyst PT (lowest on the street) likely reflects a breakup scenario. |
| Terminal Growth — 3.0% Base | Terminal growth of 3.0% reflects GOOG's durable Search franchise, Cloud infrastructure moat, and AI-driven revenue expansion. This is above long-run nominal GDP (2.5%) but justified by: (1) Search has never had a revenue decline; (2) Cloud is growing 30-63% with a $460B+ backlog; (3) Waymo represents a call option on autonomous transportation. Bear 2.0% assumes structural impairment; Bull 3.25% assumes AI monetization sustains above-GDP growth indefinitely. |
Bore Family Office • Analysis generated by Lurch • Not investment advice.