M&A Watch: Buy Alphabet Stock Amid Plans to Acquire Cybersecurity Startup WIZ?

Alphabet GOOGL shares have been virtually flat since announcing the $32 billion acquisition of New York City-based cybersecurity startup Wiz last Tuesday.

That said, acquiring Wiz would enhance Alphabet’s position in cloud security and AI-driven solutions. To that point, Wiz specializes in cloud detection and response security (CDR), using AI to identify vulnerabilities across cloud environments.

Expected to close next year, the deal is subject to regulatory approval and would be Alphabet’s largest acquisition, topping the 2012 purchase of Motorola Mobility for $12.5 billion which has bolstered Google’s hardware capabilities and secured patents to protect its Android operating system.     

Wiz Overview

Founded in 2020, Wiz’s innovative cybersecurity features include real-time agentless visibility, risk prioritization, access permissions, and routine protection. As reported by Forbes, Wiz has scaled an unprecedented pace, achieving $100 million in annual recurring revenue (ARR) in its first 18 months. Notably, Wiz achieved an ARR of $700 million in 2024 and had a private market valuation of $12 billion.

Attributing to its lofty expansion, Wiz's customers include the three largest cloud computing companies, Alphabet (Google Cloud), Amazon’s AMZN AWS, and Microsoft’s MSFT Azure. In addition to this, Wiz’s platform is used by over half of the other Fortune 100 companies along with governments, which paints the picture as to why Alphabet is willing to pay a premium to acquire the cybersecurity firm.  

Monitoring Alphabet’s Balance Sheet

While Alphabet is paying a pretty penny to acquire Wiz it’s noteworthy that the tech giant currently has $95.65 billion in cash & equivalents. Plus, Alphabet has $450.25 billion in total assets which is pleasantly above its total liabilities of $125.17 billion.

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Google Cloud Growth

Further explaining Alphabet’s willingness to acquire Wiz at a stretched valuation to its market value is that Google Cloud has been the tech giant's fastest-growing segment. Last quarter, Google Cloud revenue expanded 30% to $11.95 billion compared to $9.19 billion in Q4 2023. More impressive, is that the segment's operating income soared 142% to $2.09 billion versus $864 million in the comparative quarter.

As the third largest cloud provider behind Amazon and Microsoft, Google Cloud accounted for 12% of Alphabet's revenue last year at $43.2 billion, a 64% spike from $26.28 billion in 2023.  

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Conclusion & Final Thoughts

For now, Alphabet stock lands a Zacks Rank #3 (Hold). With its stock down 13% year to date, Alphabet hasn’t been immune to broader market volatility but expectations of double-digit top and bottom-line growth in fiscal 2025 and FY26 are appealing to long-term investors.

Considering Google Cloud has contributed to a significant portion of Alphabet's growth, acquiring Wiz could prove to be a lucrative venture down the line in regards to navigating the ever-evolving and very competitive landscape of cloud computing, cyber security, and AI configuration.

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This article originally published on Zacks Investment Research (zacks.com).

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