Alphabet's Pullback: A Second Chance for Long-Term Investors?

Alphabet (NASDAQ: GOOGL) has been one of the strongest performers among mega-cap technology peers over the past year, climbing more than 68% heading into the Feb. 12 session. That strength has been fueled by AI leadership, consistent earnings beats, and accelerating growth across cloud and advertising.

Yet despite its fundamental dominance, the stock has slipped into negative territory year-to-date, down over 8% over the past month amid broader tech weakness. The question now facing investors is simple: Does this pullback represent early signs of fatigue, or a potential long-term buying opportunity?

Alphabet Pulls Back Following Impressive Earnings

Alphabet’s latest quarterly results did little to justify the recent weakness. The company exceeded both earnings and revenue expectations. Earnings per share (EPS) came in at $2.82 versus consensus estimates near $2.63, while revenue reached $113.83 billion, topping forecasts.

For the full year, Alphabet reported $402.8 billion in revenue and $10.81 in EPS, marking 17% year-over-year growth. The results highlighted the company’s ability to scale profitably even while investing heavily in AI and infrastructure.

Google Cloud once again stood out. Fourth-quarter cloud revenue surged 48% year-over-year (YOY) to $17.66 billion, pushing the business beyond a $70 billion annualized run rate.

Perhaps more importantly, the backlog expanded 55% quarter over quarter to $240 billion, reflecting strengthening enterprise demand. 

Search revenue climbed 17% YOY, easing concerns that generative AI would materially disrupt Google’s core business. YouTube generated over $60 billion in 2025 revenue from ads and subscriptions combined, while Alphabet now counts 325 million paid consumer subscriptions across its ecosystem.

On the AI front, Gemini has surpassed 750 million monthly active users, with more than 10 billion tokens processed per minute via API usage, evidence of rapidly expanding enterprise and developer adoption.

The Selloff: CapEx Concerns or Broader Tech Weakness?

Following earnings, shares initially dropped on news that Alphabet expects capital expenditures (CapEx) between $175 billion and $185 billion in 2026. Management clarified that the increased spending will primarily support AI compute capacity, expand cloud infrastructure, and enhance user experiences across its platforms. In reality, competing at scale in AI requires sustained investment, and Alphabet appears willing to lean in aggressively.

However, the recent pullback seems less about CapEx itself and more about broader weakness in software and large-cap tech. As high-multiple growth stocks rotate lower, even fundamentally strong names have been caught in the downdraft.

Yet Alphabet’s leadership position remains intact.

AI Momentum and Waymo Expansion Continue

Beyond earnings, innovation continues to accelerate. Alphabet recently rolled out upgrades to its Gemini Deep Think model, enhancing performance in math and scientific reasoning. The model integrates Google Search to reduce inaccuracies and assist researchers in practical applications, another step toward AI utility at scale.

Meanwhile, Waymo is expanding its autonomous driving footprint. The company has begun offering rides powered by its sixth-generation autonomous system and plans to expand service into 20 additional cities, including Tokyo and London.

And overall analyst sentiment is reflecting the resounding fundamental dominance. Alphabet maintains a Moderate Buy rating, with a consensus price target implying roughly 18% upside, the highest consensus target on record.

Is GOOGL Approaching Value Territory?

From a technical perspective, shares are approaching a key support zone near $300, with secondary support closer to $280. A successful hold at either level would likely define a higher low within the broader uptrend.

Valuation tells a similar story. Compared to its Magnificent Seven peers, Alphabet’s trailing and forward multiples sit near the middle of the pack. While the stock currently trades slightly above its three-year average P/E, a pullback to the $280–$300 range would bring valuation closer to historical norms, potentially tipping the risk-reward balance in favor of long-term buyers.

In short, the fundamentals remain strong, AI leadership continues to expand, and capital investment reflects ambition rather than weakness. If broader tech pressure persists, Alphabet’s pullback may prove less like a warning and more like an opportunity.

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