Alphabet Sold Its Entire Stake in This Skyrocketing Artificial Intelligence (AI) Stock and Bought This $32 Billion Startup Instead
Alphabet's investment fund managed over $7 billion in assets, with a small portion held in publicly traded stocks.
After initially investing in this company's series C in 2015, Alphabet has fully cut its stake in the business.
It plans to spend $32 billion to acquire one of its biggest rivals and bolster the fastest-growing segment of Google.
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Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) is one of the biggest spenders on artificial intelligence (AI) in the world. During its second-quarter earnings call, CFO Anat Ashkenazi said that it would spend $85 billion this year on capital expenditures, up from her prior outlook of $75 billion. Two-thirds of that would go toward servers for training and running large language models.
But Alphabet is also heavily invested in AI in other areas, including its CapitalG independent growth fund. The fund has $7 billion in assets under management, and it's been an early investor in several major companies (16 of which have made IPOs).
Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »
As of the end of Q2, the fund held 36 publicly traded stocks, according to its 13F filing with the SEC. That's down from 40 stocks held after the first quarter after fully divesting several holdings. One of those divested holdings is a major AI stock that CapitalG first invested in during its Series C in 2015. Instead, its parent company Alphabet has agreed to acquire a five-year-old start-up in the same space for $32 billion.
Taking gains on one of this year's biggest winners
Over the last two quarters, CapitalG has sold off its remaining shares of CrowdStrike. At the end of 2023, the fund held 1.3 million shares of the stock, and it accounted for 15% of the fund's marketable equity portfolio's value.
But CapitalG started selling off the stock as it rose in value in 2024. That summer, however, CrowdStrike suffered a massive outage, which sent the shares tanking more than 40% from its high. Once shares recovered to their previous high, CapitalG resumed selling.
The biggest factor in the investment team's decision to sell the stock appears to be valuation. That said, Alphabet's decision to acquire competing cloud security company Wiz in March may have pushed the team to complete its divestment.
CrowdStrike is still recovering from the massive outage it experienced in July of last year. That's weighed heavily on its operating margin. The company has stepped up sales and marketing spend while offering customers discounts for purchasing multiple modules across its security platform. Non-GAAP operating margin fell to 18% in its most recent quarter, down from 23% a year ago.
But as CrowdStrike puts last year's outage in the rearview mirror, it's well positioned to expand its margins once again and accelerate earnings growth. Revenue continues to climb rapidly, up 42% year over year. That's bolstered by more customers taking multiple modules, with 48% using at least six of its products. That increases switching costs, and CrowdStrike's robust portfolio of solutions plays into the trend of vendor consolidation. As companies migrate more workloads to the cloud, they're looking for an all-in-one solution that can handle all their security needs, and CrowdStrike is well suited to meet that demand.
CrowdStrike is also investing in agentic AI capabilities with its new Charlotte platform. The software can take swift action to curb security threats upon detection. That's built on top of CrowdStrike's machine learning algorithms used to detect security threats in the first place.
But even with the strong top-line growth, CrowdStrike shares currently trade for around 27 times sales. That makes it one of the most expensive stocks, by far, in the cybersecurity space. And with Alphabet's planned acquisition of Wiz, CrowdStrike's position in cloud security may be about to get a bit weaker.
Building a more competitive cloud service
Google currently operates the third-largest public cloud platform, Google Cloud. While it's growing quickly, it still trails its next-closest competitor, Microsoft 's Azure, by a wide margin. Its Q2 run rate of $54.5 billion in cloud revenue is well behind Azure's $75 billion in revenue for fiscal 2025. Given that Microsoft's growing its sales faster than any company in the space, Google isn't going to catch up anytime soon.
Embedding Wiz's cloud security solutions into Google Cloud can add a new source of revenue for the company and increase its stickiness. That said, overdoing it and losing Wiz's overall neutrality when it comes to cloud platforms could lead some customers to shift to competing services like CrowdStrike. So finding the right balance will be key for Alphabet.
Wiz can benefit from Alphabet's ownership as well. It would gain access to more capital for investing in artificial intelligence, which is essential for identifying threats and closing vulnerabilities.
Over time, Google Cloud could win share of cloud contracts in industries where security is of premium importance, such as government contracts or banking. While the $32 billion price tag for Wiz is extremely expensive, the potential for Google to grow the business and strengthen its cloud platform makes it worth it, especially since it's sitting on $95 billion of cash and marketable securities.
Shares of Alphabet look attractive at a forward price-to-earnings of less than 20. While it suffers from potential regulatory pressure, investors are getting a good value at the current price. If regulators approve the Wiz acquisition, it should bolster the fastest-growing segment of the business, making it an even better deal at this price.
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The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Alphabet wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,119,863!*
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Adam Levy has positions in Alphabet and Microsoft. The Motley Fool has positions in and recommends Alphabet, CrowdStrike, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
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Forward-Looking Statements This communication includes or incorporates forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ('Exchange Act'). You can identify these forward-looking statements by our use of words such as 'intend,' 'plan,' 'may,' 'will,' 'project,' 'estimate,' 'anticipate,' 'believe,' 'expect,' 'continue,' 'potential,' 'opportunity' and similar expressions, whether in the negative or affirmative. Such forward-looking statements, which speak only as of the date hereof, are based on managements' estimates, assumptions and beliefs regarding our future plans, intentions and expectations. We cannot guarantee that we will achieve these plans, intentions or expectations. All statements regarding our expected financial position, business, results of operations and financing plans are forward-looking statements. Actual results or events could differ materially from the plans, intentions or expectations disclosed in the forward-looking statements we make. We have included important facts in various cautionary statements in this communication that we believe could cause our actual results to differ materially from forward-looking statements that we make. The forward-looking statements do not reflect the potential impact of any future acquisitions, mergers or dispositions. We undertake no obligation to update or revise any forward-looking statements because of new information, future events or otherwise. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this release. For more details on factors that could affect these expectations, please see MediaCo's other filings with the Securities and Exchange Commission. Definitions and Disclosures Regarding Non-GAAP Financial Information We define Adjusted EBITDA as consolidated Operating loss adjusted to exclude restructuring expenses, business combination transaction costs, unusual and non-recurring expenditures and non-cash compensation included within operating expenses, as well as the following line items presented in our Statements of Operations: Depreciation and amortization, Loss on disposal of assets, change in fair value of warrant shares liability and Other income. Alternatively, Adjusted EBITDA is calculated as Net loss, adjusted to exclude Provision for income taxes, Interest expense, net, Depreciation and amortization, Loss on disposal of assets, Change in fair value of warrant shares liability, Other income, and Other adjustments. We use Adjusted EBITDA, among other measures, to evaluate the Company's operating performance. This measure is among the primary measures used by management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of management. We believe this measure is an important indicator of our operational strength and performance of our business because it provides a link between operational performance and operating income. It is also a primary measure used by management in evaluating companies as potential acquisition targets. We believe the presentation of this measure is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by management. We believe it helps improve investors' ability to understand our operating performance and makes it easier to compare our results with other companies that have different capital structures or tax rates. In addition, we believe this measure is also among the primary measures used externally by our investors, analysts and peers in our industry for purposes of valuation and comparing our operating performance to other companies in our industry. Since Adjusted EBITDA is not a measure calculated in accordance with GAAP, it should not be considered in isolation of, or as a substitute for, operating loss or net loss as an indicator of operating performance and may not be comparable to similarly titled measures employed by other companies. Adjusted EBITDA is not necessarily a measure of our ability to fund our cash needs. Because it excludes certain financial information compared with operating loss and compared with consolidated net loss, the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded. For a reconciliation of these non-GAAP financial measurements to the GAAP financial results cited in this news announcement, please see the supplemental tables at the end of this release. About MediaCo Holding Inc. MediaCo Holding Inc. (Nasdaq: MDIA) is a diverse-owned, multi-platform media company serving multicultural audiences across the U.S. Through a network of iconic brands—including Hot 97, WBLS, EstrellaTV, Estrella News, Que Buena Los Angeles and the Don Cheto Radio Network—MediaCo reaches over 20 million people monthly via television, radio, digital, and streaming platforms. The company's innovative and culturally resonant content spans music, news, and entertainment across major local and national markets. More info at Three Months Ended June 30, Change (Dollars in thousands) 2025 2024 $ % NET REVENUES $ 31,245 $ 26,202 5,043 19 OPERATING EXPENSES: Operating expenses 34,774 34,647 127 — Corporate expenses 1,554 3,445 (1,891 ) (55 ) Depreciation and amortization 1,697 1,431 266 19 Loss on disposal of assets 5 5 — N/A Total operating expenses 38,030 39,528 (1,498 ) (4 ) OPERATING LOSS (6,785 ) (13,326 ) 6,541 (49 ) OTHER INCOME (EXPENSE): Interest expense, net (3,855 ) (3,782 ) (73 ) 2 Change in fair value of warrant shares liability — (31,027 ) 31,027 N/A Other income 2,119 10 2,109 21,090 Total other expense (1,736 ) (34,799 ) 33,063 (95 ) LOSS BEFORE INCOME TAXES (8,521 ) (48,125 ) 39,604 (82 ) PROVISION FOR INCOME TAXES 279 182 97 53 NET LOSS $ (8,800 ) $ (48,307 ) 39,507 (82 ) MEDIACO HOLDING INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Six Months Ended June 30, Change (Dollars in thousands) 2025 2024 $ % NET REVENUES $ 59,275 $ 32,908 26,367 80 OPERATING EXPENSES: Operating expenses 63,986 41,297 22,689 55 Corporate expenses 3,147 6,835 (3,688 ) (54 ) Depreciation and amortization 3,466 1,564 1,902 122 Loss on disposal of assets 144 5 139 2,780 Total operating expenses 70,743 49,701 21,042 42 OPERATING LOSS (11,468 ) (16,793 ) 5,325 (32 ) OTHER INCOME (EXPENSE): Interest expense, net (7,609 ) (3,918 ) (3,691 ) 94 Change in fair value of warrant shares liability — (31,027 ) 31,027 N/A Other income 2,230 20 2,210 11,050 Total other expense (5,379 ) (34,925 ) 29,546 (85 ) LOSS BEFORE INCOME TAXES (16,847 ) (51,718 ) 34,871 (67 ) PROVISION FOR INCOME TAXES 559 266 293 110 NET LOSS $ (17,406 ) $ (51,984 ) 34,578 (67 ) MEDIACO HOLDING INC. NON-GAAP FINANCIAL MEASURES RECONCILIATIONS OF NET LOSS TO EBITDA AND ADJUSTED EBITDA (1) AND NET LOSS MARGIN TO ADJUSTED EBITDA MARGIN (1) Three Months Ended June 30, Six Months Ended June 30, (Dollars in thousands) 2025 2024 2025 2024 Net revenues $ 31,245 $ 26,202 $ 59,275 $ 32,908 Net Loss $ (8,521 ) $ (48,125 ) $ (17,406 ) $ (51,984 ) % Margin (28 )% (184 )% (29 )% (158 )% Provision for income taxes 279 182 559 266 Interest expense, net 3,855 3,782 7,609 3,918 Depreciation and amortization 1,697 1,431 3,466 1,564 EBITDA $ (2,690 ) $ (42,730 ) $ (5,772 ) $ (46,236 ) Loss on disposal of assets 5 5 144 5 Change in fair value of warrant shares liability — 31,027 — 31,027 Other income (2,119 ) (10 ) (2,230 ) (20 ) Other adjustments 6,595 6,486 10,776 10,725 Adjusted EBITDA (1) $ 1,791 $ (5,222 ) $ 2,918 $ (4,499 ) % Margin (1) 6 % (20 )% 5 % (14 )% (1) We define Adjusted EBITDA as consolidated Operating loss adjusted to exclude restructuring expenses, business combination transaction costs, unusual and non-recurring expenditures and non-cash compensation included within operating expenses, as well as the following line items presented in our Statements of Operations: Depreciation and amortization, Loss on disposal of assets, change in fair value of warrant shares liability and Other income. Alternatively, Adjusted EBITDA is calculated as Net loss, adjusted to exclude Provision for income taxes, Interest expense, net, Depreciation and amortization, Loss on disposal of assets, Change in fair value of warrant shares liability, Other income, and Other adjustments. We define Adjusted EBITDA margin as Adjusted EBITDA as a percentage of net revenue. We use Adjusted EBITDA and Adjusted EBITDA margin, among other measures, to evaluate the Company's operating performance. These measures are among the primary measures used by management for the planning and forecasting of future periods, as well as for measuring performance for compensation of executives and other members of management. We believe these measures are an important indicator of our operational strength and performance of our business because they provide a link between operational performance and operating income. They are also primary measures used by management in evaluating companies as potential acquisition targets. We believe the presentation of these measures is relevant and useful for investors because it allows investors to view performance in a manner similar to the method used by management. We believe they help improve investors' ability to understand our operating performance and make it easier to compare our results with other companies that have different capital structures or tax rates. In addition, we believe these measures are also among the primary measures used externally by our investors, analysts and peers in our industry for purposes of valuation and comparing our operating performance to other companies in our industry. Since Adjusted EBITDA and Adjusted EBITDA margin are not measures calculated in accordance with GAAP, they should not be considered in isolation of, or as a substitute for, operating loss or net loss, or net loss margin as indicators of operating performance and may not be comparable to similarly titled measures employed by other companies. Adjusted EBITDA and Adjusted EBITDA margin are not necessarily measures of our ability to fund our cash needs. Because they exclude certain financial information compared with operating loss, consolidated net loss, and consolidated net loss margin, the most directly comparable GAAP financial measures, users of this financial information should consider the types of events and transactions which are excluded.
