Berkshire Hathaway has built Alphabet (NASDAQ: GOOGL, GOOG) into its third-largest equity holding, and the case for that position centers on two data points: Google Cloud's 82% year-over-year revenue growth in the second quarter of 2026, and more than $242 billion in liquidity on the balance sheet, up from $127 billion a year earlier. The complication is what it cost to get there. Alphabet has said it plans to spend between $195 billion and $205 billion on capital expenditures this year, mostly on AI data center infrastructure, pushing long-term debt from $46.5 billion at the end of June 2025 to around $123 billion.
Warren Buffett, who retired as Berkshire's chief executive at the end of 2025 and handed the role to Greg Abel, initiated the original Alphabet position. Under Abel, the stake has grown into the conglomerate's third-largest equity holding. Buffett has described forever as his preferred holding period for a stock, which is the framing individual investors typically borrow when they follow his moves.
What's changed at the revenue line
Alphabet has earned most of its revenue from digital advertising and began applying AI to its products in 2001. The read-through that matters now is Google Cloud, which sells foundational models, developer tools, and infrastructure for AI, including support for Google Gemini. Gemini is the product the company positioned against competitive pressure from ChatGPT and Claude. The cloud platform's 82% year-over-year growth in Q2 2026 is the single sharpest data point in the bull case. Alphabet's overall revenue grew 24% in the same period.
Buffett refers to cash flows as "owner earnings," and the source that quoted him on the phrase suggested this framing may explain his comfort with the capex load. Over the past four reported quarters, Alphabet generated more than $53 billion in free cash flow, a figure that excludes capital expenditures. The stock trades at a price-to-earnings ratio of 17.
The counterargument
Spending between $195 billion and $205 billion in a single year, by Alphabet's own guidance, is the number that would make Buffett uneasy in most situations. Long-term debt has nearly tripled in roughly twelve months. The bet embedded in Berkshire's position is that data center spending now produces cloud revenue later, and Q2 2026's growth rate is the evidence offered for that translation. One strong quarter is not a proof of concept.
On balance, the Alphabet position reads as a judgment that infrastructure spending at this scale functions more like a toll road than a sunk cost. The line to watch is whether Google Cloud's growth rate holds as the debt climbs. If that rate compresses before free cash flow absorbs the debt load, the valuation at 17 times earnings becomes the least comfortable part of the story.