Key Points
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Buffett told CNBC on July 15 that he, not successor Greg Abel, initiated Berkshire’s Alphabet position.
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Berkshire has built a stake worth roughly $31 billion, including a $10 billion private placement struck in June.
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Alphabet’s cloud revenue grew 63% last quarter, and its backlog topped $460 billion.
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When Berkshire Hathaway revealed a large Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) position last year, the easy assumption was that new CEO Greg Abel was behind it. Warren Buffett, after all, had spent decades steering clear of big technology bets outside of Apple.
On Wednesday, Buffett set the record straight. “I initiated it,” he told CNBC, adding that not buying the search giant sooner was a mistake.
It was a candid admission from an investor who rarely second-guesses himself in public. And it landed as the stock traded near an all-time high, up about 3% on the day and more than double where it sat a year ago.
So should regular investors follow Buffett into Alphabet here?
How the bet came together
Berkshire first disclosed its Alphabet stake in the third quarter of 2025, then more than tripled it early this year. In June, it went further. The conglomerate agreed to buy $10 billion of stock directly from the company in a private placement ($5 billion of Class A shares and $5 billion of Class C shares) to help fund Alphabet’s artificial intelligence (AI) build-out. All told, the position is now worth about $31 billion, one of Berkshire’s larger equity holdings and its biggest new technology bet in years.
Buffett was refreshingly blunt about where it ranks for him. He said he doesn’t like Alphabet as well as “at least four or five other businesses that we own,” and he flagged the enormous sums the company and its rivals are pouring into AI.
“[T]hey’re all laying out hundreds of billions, and that’s real money,” he said.
He was just as clear about who runs Berkshire now. “We talk all the time,” Buffett said of Abel, “but he is the decider.”
The business behind the conviction
Buffett’s concerns are worth holding onto. But so is the reason he bought in the first place: Alphabet is putting up some of its strongest numbers in years.
In the first quarter of 2026, revenue rose 22% year over year to $109.9 billion, the company’s 11th straight quarter of double-digit growth. Operating margin expanded about 2 percentage points to 36.1%, and earnings per share soared 82% to $5.11. Most of that jump, though, came from unrealized gains on the company’s equity investments rather than the core business — operating income grew 30%.
The standout remains Google Cloud. Segment revenue jumped 63% year over year to $20 billion, a sharp acceleration, and the cloud backlog (contracted work not yet booked as revenue) nearly doubled from the prior quarter to more than $460 billion. Alphabet expects to recognize just over half of that backlog as revenue within two years, so the demand converts on a near horizon, not a distant one.
And the strength is broad. The company pointed to solid results across the business, from search to YouTube, not just the cloud unit grabbing headlines.
Of course, advertising still pays most of the bills. But a fast-growing, increasingly profitable cloud arm gives Alphabet a second engine of growth that advertising alone never provided. For a company this size, an accelerating segment as large as the cloud is unusual, and it is a big reason Alphabet’s overall growth has climbed rather than faded.
The risk is the one Buffett named. To serve all that demand, Alphabet expects to spend $180 billion to $190 billion on capital expenditures this year, with more to come in 2027. If those investments don’t earn their keep, the spending will weigh on free cash flow and margins for years to come. That is the central bet, and it is not a small one.
Which brings the story back to price. Alphabet trades at about 28 times earnings — only a touch above the S&P 500‘s multiple, and cheaper than most of its megacap AI peers. For a business compounding at better than 20% with an accelerating, increasingly profitable cloud arm, I’d call that reasonable rather than stretched.
In my view, Alphabet is a buy here, though not because Buffett owns it. The real case is the combination of 20%-plus revenue growth, a cloud business that keeps accelerating, and a valuation in line with the market. The heavy AI spending is the risk worth watching, as Buffett himself pointed out. But at today’s price, I’m comfortable owning Alphabet, endorsement or not.
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Daniel Sparks and his clients have positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.
