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Reddit Didn’t Sink Alphabet, Its $51bn Capex Quarter Did

Alphabet lost about $500bn of market value on 29 October on its own 3Q26 print; Reddit reported after that close and fell about 30% the next day. What the market sold was cash flow: capex of $51.4bn exceeded operating cash flow of $42.3bn, and 2027 capex will rise significantly. Search still grew 12% on 8% more paid clicks. We initiate at Neutral with a Dec-27 price target of $310.

By K2 Research TeamNov 5, 2026PDF · 10 pages
Reddit Didn’t Sink Alphabet, Its $51bn Capex Quarter Did

Alphabet lost about $500bn of market value on 29 October on its own 3Q26 print; Reddit reported after that close and fell about 30% the next day. What the market sold was cash flow: capex of $51.4bn exceeded operating cash flow of $42.3bn, and 2027 capex will rise significantly. Search still grew 12% on 8% more paid clicks. We initiate at Neutral with a Dec-27 price target of $310.

What’s inside

  1. Reddit didn’t do it: initiating at Neutral, Dec-27 PT $310
  2. Investment thesis
  3. Valuation
  4. 3Q26 summary
  5. Capex and funding update
  6. Wrong suspect: the order of events
  7. Follow the clicks: who loses when Google answers
  8. The real debate: capex, cash and dilution
  9. Investment thesis, valuation and risks
  10. Risks to rating and price target
  11. What would make us wrong?
  12. Signposts
  13. Summary of financials

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Every New Dollar of Backblaze Revenue Needs $2 of Drives and Servers
Equity researchPDF · 8 pp

Every New Dollar of Backblaze Revenue Needs $2 of Drives and Servers

Backblaze’s margins have never been higher and B2 growth has re-accelerated to 47%, yet the stock is 59% below its August high after October’s AI-infrastructure sell-off. The catch is the cash: each new dollar of ARR needs about $2 of drives and servers, bought from makers that have raised prices per TB by 28%, and we expect free cash flow of -$38M in 2027. We initiate at Neutral with a Dec-27 price target of $10 (+19%).

K2 Research TeamNov 7, 2026
Neoclouds Fell Up to 17% This Week, and Beta Explains Nearly All of It
Equity researchPDF · 9 pp

Neoclouds Fell Up to 17% This Week, and Beta Explains Nearly All of It

All four neoclouds fell more than the Nasdaq-100’s 4.8% after Microsoft’s and Alphabet’s capex misses, from SpaceX (-7.2%) to IREN (-17.0%), and beta explains each move to within 3pp. We reiterate Overweight on Nebius (PT $207, now +34% upside) and IREN (PT $37), and Underweight on SpaceX (PT $90) and CoreWeave (PT $44).

K2 Research TeamNov 1, 2026
Alphabet’s $500bn One-Day Fall Came From Its Own Results
Equity researchPDF · 9 pp

Alphabet’s $500bn One-Day Fall Came From Its Own Results

Alphabet lost about $500bn of value on 29 October, falling 12.6% on its own 3Q26 results before Reddit had even reported: Search grew 12% against about 15% expected and paid clicks slowed to 8%. We initiate Neutral on Alphabet (PT $305) and Overweight on Reddit (PT $130).

K2 Research TeamOct 31, 2026