Warren Buffett Fan Greg Abel More Than Triples Berkshire Stake in This “Seventh Good” Stock. Are you shopping?
When Berkshire Hathaway (NYSE: BRKA)(NYSE: BRKB) filed its first quarterly 13-F under new CEO Greg Abel late last week, one move stood out from the rest: In his first three months running the conglomerate, Abel increased Berkshire’s stake Alphabets (NASDAQ: GOOG)(NASDAQ: GOOGL) by 224%, increasing the position to almost 58 million shares worth about 23 billion. That makes the Google parent one of Berkshire’s seven largest holdings.
Of course, the stake was much smaller when Warren Buffett started in the third quarter of 2025. But its doubling under Abel — who officially took over as CEO of Berkshire on Jan. 1, 2026 — sends a clear signal of condemnation to the search giant.
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So is Alphabet still a buy after this vote of confidence — and a surprising run in the stock price?
Why the pole makes sense
The bullets have been firing on all cylinders. First-quarter revenue rose 22%, or 19% on a constant basis, to $109.9 billion. That marked an acceleration from 18% growth in the fourth quarter of 2025 and 16% growth in the third quarter of 2025, and was the company’s fastest growth rate in more than two years. Indeed, Q1 was Alphabet’s 11th consecutive quarter of double-digit growth.
In addition, Alphabet’s first-quarter operating income jumped 30% to $39.7 billion, and the company’s operating margin expanded two points to 36.1%.
Of course, Google Cloud remains Alphabet’s biggest motivation. Cloud computing segment revenue jumped 63% to $20 billion — a sharp acceleration from 48% growth in Q4 2025 and 34% growth in Q3 2025. Even more impressive, the segment’s operating margin nearly doubled to 32.9% from 17.6% in the three-month period to $6%. And the backlog — a rough proxy for future revenue under the contract — nearly doubled in three months to $462 billion.
“Our Enterprise AI solutions have become our primary driver of Cloud growth for the first time,” said Alphabet CEO Sundar Photosi during the company’s first quarter call. “In Q1, revenue from products built on our next gen AI models grew nearly 800% year over year.”
Meanwhile, Alphabet’s advertising machine appears to be in disarray. Search and other advertising revenue rose 19% to $60.4 billion. YouTube ads grew by 11%. And paid subscriptions across YouTube, Google One, and Gemini reached 350 million.
But there are risks to be considered.
Spending in the first quarter alone reached $35.7 billion, and management raised its full-year 2026 spending guidance to a range of $180 billion to $190 billion — with Chief Financial Officer Anat Ashkenazi adding that 2027 capital spending “will be significantly higher than in 2026.” That kind of capital creates real pressure on free cash flow and depreciation expense — and leaves little margin for error if AI demand is to cool meaningfully.
But is the stock still a buy?
The challenge for new investors is that Alphabet shares aren’t trading the way they were when Berkshire started the position last fall. Alphabet’s first Berkshire position was valued at $243 per share at the end of the third quarter. As of this writing, shares are trading around $393, and the stock is up about 25% year to date.
That said, the stock’s valuation still looks reasonable for such a fast-growing business. Alphabet’s average earnings per share remains around 30 — only a slight premium to its five-year average of 24. Given the company’s rapid revenue growth, expanding margins, and the cloud business that may now be its main driver of long-term earnings, the multiples could prove a fair value for what investors are getting.
Another way to think about it: Buffett (and probably Abel now) usually wants a wide margin of safety before starting a position in a stock. So, the fact that Berkshire chose to add more to the position rather than cut it (or even sell it) — as the conglomerate does with many other long-term assets — suggests that Abel and Co. they see huge long-term business opportunities, even at this level.
However, this is not a trade-off. The easy money in the stock is likely already made, and investors should keep in mind that the company’s growing cash flow may offset near-term free cash flow. But for those who don’t yet have exposure to the search and AI giant, a small starting point may make sense at current levels — with room to add to any reasonable regression.
Should you buy Alphabet stock right now?
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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 policy of disclosure.
Warren Buffett Follower Greg Abel More Than Triples Berkshire Stake in These “Seven Amazing” Stocks. Are you shopping? was originally published by The Motley Fool
