Alphabet Inc. (NASDAQ:GOOGL) can finance Waymo from a much larger advertising and cloud business. That gives it room to build autonomous transportation, but the investment is not free. The question is whether growing profits can absorb heavy infrastructure spending while Waymo works toward a lasting business model.
At roughly 23 times forward earnings, the existing businesses must justify the price before investors give much value to future robotaxi profits. For alternatives to Alphabet’s Waymo investment, compare the 10 Best Autonomous Vehicle Stocks to Buy Now.
More Rides Must Eventually Mean Better Economics
Autonomous ride-hailing can spread vehicle and technology costs across more paid trips. But entering a city also takes local operating support, fleet capacity, maintenance, and proof that customers will use the service again and again.
Waymo’s February expansion announcement described launches for selected riders in four more cities. Its leadership targeted more than one million weekly rides by year-end. That target shows the ambition, but it does not tell us how many rides Waymo has reached.
The Core Business Is Still Funding the Opportunity
Alphabet Inc. (NASDAQ:GOOGL)’s July 22 earnings release reported second-quarter revenue growth of 24% to $119.8 billion. Search revenue rose 17%, and Google Cloud revenue rose 82% to $24.8 billion.
Waymo combines fleet development with a large corporate backer. Our autonomous driving stocks list compares other routes into this market.
Operating income rose 30% to $40.8 billion. The operating margin reached 34%, which means Alphabet kept about 34 cents of each revenue dollar as operating profit.
Those figures counter the view that new AI products must immediately undermine the existing business. Search and Cloud kept growing, and that gives Alphabet resources to fund new services.
Waymo sits within Other Bets, which reported $382 million in revenue and a $1.8 billion operating loss. Those are combined segment figures, not Waymo’s own results. Still, they show that this part of Alphabet consumes earnings and does not support group profit.
Investment Has Begun to Absorb More Cash
The quarterly filing shows that the spending test goes beyond Waymo. Alphabet generated $39.1 billion in operating cash in Q2 but spent $44.9 billion on property and equipment. Free cash flow therefore fell below zero for the quarter.
That does not mean the underlying businesses stopped generating cash. It means investment exceeded the operating cash available in that period.
More rides matter only if the economics work. Compare companies pursuing commercial deployment in our self-driving car stocks list.
New infrastructure could support future revenue. The risk is that capacity and operating costs rise before customers generate enough extra profit. Waymo adds another demand on capital inside that wider investment program.
The strongest buying argument therefore rests on profitable core growth. It does not rest on treating all new infrastructure and robotaxi activity as immediately valuable.
Reported Earnings Make the P/E Look Cheaper
Alphabet Inc. (NASDAQ:GOOGL) trades at 17.62 times trailing earnings and 22.83 times forward earnings. The forward figure means investors pay roughly $23 for each $1 of annual earnings analysts expect.
The forward multiple is higher here, not lower. Alphabet’s second-quarter release identified $99 billion of gains on equity securities, which added $6.26 to quarterly EPS. That makes trailing reported earnings a poor standalone measure of recurring profit.
The forward P/E sits below the 28.01 it showed on December 31, 2025, but above the 18.90 on June 30, 2025. The historical comparison does not support a simple claim that the stock is cheap.
Alphabet’s spending challenge extends beyond Waymo. Our AI stocks to buy and hold offers a wider comparison of businesses pursuing AI growth.
The communications-sector median is 12.75 times forward adjusted earnings, and Alphabet’s multiple is higher. Search scale and cloud growth support a premium, while heavy spending and uncertain returns from newer businesses limit the case for paying it.
Market Sentiment
At the end of Q2 2026, 275 hedge funds held Alphabet’s Class A shares, up from 265 in Q1. Their combined stakes totaled $93.74 billion, up from $72.41 billion. Class C holdings are separate.
Does Waymo Strengthen the Buying Case?
Alphabet Inc. (NASDAQ:GOOGL)’s core growth supports holding the shares, but Waymo alone does not justify a stronger purchase recommendation. Investors already pay a premium while infrastructure spending absorbs substantial cash and Other Bets keeps losing money. Better cash conversion alongside sustained Search and Cloud growth would strengthen the case for adding shares. If investment keeps growing faster than recurring profits, more robotaxi activity will not fix the valuation problem.
Compare Alphabet’s funding capacity with the other companies in 10 Best Autonomous Vehicle Stocks to Buy Now.
While we acknowledge the risk and potential of GOOGL as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOGL and that has 10,000% upside potential, check out our report about this cheapest AI stock.
Read next: 10 Best AI Power Grid Stocks to Buy According to Analysts and 8 Best AI Stocks to Buy According to Billionaire Ken Griffin.
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