Alphabet Inc.

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Somewhat Bullish +35

Billionaire Bill Ackman Sells Alphabet Stock and Buys a Mega-Cap Stock Down 42% From Its High

AI-generated analysis

πŸ“‰ Bill Ackman sold his entire stake in Alphabet (GOOG) during the second quarter to initiate a new position in Netflix.

πŸ’° Alphabet reported Q2 revenue of $120 billion, marking the 12th consecutive quarter of double-digit growth.

☁️ Google Cloud revenue accelerated 82% in the second quarter driven by strong demand for AI infrastructure.

πŸ€– For the first time, Alphabet earned revenue from selling custom AI accelerators called TPUs to external customers.

⚑ CEO Sundar Pichai noted Gemini APIs now process 22 billion tokens per minute, up from 16 billion a quarter earlier.

πŸ’Έ Alphabet reported negative free cash flow for the first time as a public company due to aggressive AI spending.

πŸ“ˆ The company raised its 2026 capital expenditure guidance to $200 billion, up significantly from $91 billion last year.

πŸ“‰ Netflix is down 42% from its high in June 2025 as investors worry about growth prospects following failed bidding wars.

🎬 Netflix remains the dominant streaming player with more monthly active users and better retention rates than rivals.

πŸ’° Wall Street estimates Netflix earnings will increase at 21% annually over the next three years.

πŸ“Š Analysts view Netflix as undervalued with a median target price of $94, implying 20% upside from the current share price.

πŸ† Among the top 10 most-watched original series and movies in late August, Netflix produced four series and six movies.

Bullish Signals
  • Alphabet reported strong Q2 financial results with revenue rising 24% to $120 billion and GAAP operating income increasing 31% to $41 billion.
  • Google Cloud revenue surged 82% in the second quarter, driven by strong demand for AI infrastructure and growing market share.
  • Alphabet achieved a milestone by earning revenue from selling custom AI accelerators (TPUs) to external customers for the first time.
  • CEO Sundar Pichai reported significant growth in Gemini API usage, with tokens processed per minute increasing from 16 billion to 22 billion.
  • Google gained two percentage points of market share in cloud infrastructure and platform services over the past year.
Risk Factors
  • Alphabet reported negative free cash flow for the first time as a public company due to aggressive spending on AI infrastructure.
  • The company raised its 2026 capital expenditure guidance to $200 billion, up from $91 billion last year, raising concerns about near-term volatility.
  • Alphabet's stock fell sharply following the second-quarter earnings report and continues to trade below pre-report levels as of Sept. 4.
Full Analysis
Billionaire Bill Ackman's hedge fund, Pershing Square, sold its entire stake in Alphabet (GOOG) during the second quarter while initiating a position in Netflix. This move highlights a strategic shift away from Alphabet, which has surged over 100% in 18 months, toward what Ackman views as a more attractive valuation opportunity in the streaming sector. Alphabet reported strong financial results in Q2 with revenue rising 24% to $120 billion and GAAP operating income increasing 31% to $41 billion. However, the company faced significant headwinds related to its aggressive spending on artificial intelligence infrastructure, resulting in negative free cash flow for the first time as a public company. CEO Sundar Pichai highlighted robust growth in Google Cloud, which saw revenue rise 82% driven by demand for AI infrastructure and the sale of custom TPUs. Despite this operational strength, Ackman's exit suggests concerns regarding near-term volatility caused by the massive capital expenditure guidance raised to $200 billion for 2026. In contrast, Netflix is down 42% from its record high due to failed bidding wars and growth concerns, yet analysts view it as undervalued with a median target price implying 20% upside. Ackman's pivot reflects a preference for Netflix's dominant market position, pricing power, and untapped opportunities in advertising and live sports over Alphabet's current capital-intensive AI expansion.