TLDR
- Alphabet has agreed to buy cybersecurity startup Wiz for $32 billion, its largest acquisition to date
- The deal comes after previous talks were called off in July 2024 over antitrust concerns
- The acquisition helps Alphabet expand its cloud infrastructure business and enter the cybersecurity market
- Wiz provides AI-powered cloud security solutions and was previously valued at $12 billion
- Despite facing competitive and regulatory challenges, Alphabet maintains strong fundamentals and reasonable valuation
Alphabet, the parent company of Google, has reached an agreement to acquire cybersecurity startup Wiz for $32 billion. The deal was reported by the Financial Times on Tuesday, citing people familiar with the matter.
This acquisition marks Alphabet’s largest to date. The agreement price is at least one-third higher than the $23 billion deal Alphabet proposed last year.
Those earlier talks were called off in July 2024. At that time, Wiz expressed concerns about clearing antitrust hurdles and stated it would focus on an initial public offering instead.
The acquisition will help Alphabet tap into the growing cybersecurity market. It will also expand the company’s booming cloud infrastructure business, which generated more than $43 billion in revenue last year.
While the Trump administration is expected to drop some antitrust policies pursued under the Biden administration, the deal could still attract regulatory scrutiny. A merger creating a cybersecurity giant will likely draw attention from regulators.
Wiz provides cloud-based cybersecurity solutions powered by artificial intelligence. These solutions help companies identify and remove critical risks on cloud platforms.
The cybersecurity startup works with multiple cloud providers. These include Microsoft and Amazon. Wiz counts major companies among its customers, from Morgan Stanley to DocuSign.
Wiz has 900 employees across the United States, Europe, Asia, and Israel. The company previously announced plans to add 400 workers globally in 2024.
Interest in cybersecurity has surged
Interest in the cybersecurity industry has surged since the global CrowdStrike outage last year. This event made enterprises more concerned about protecting their digital infrastructures.
Wiz was last valued at $12 billion in a private funding round in May 2024. The current deal values the company at nearly three times that amount.
Alphabet faces several challenges in its core business. Competition from AI chatbots and virtual agents threatens Google’s search business. Gartner estimates that traditional search engine volumes will drop 25% by 2026.
The company also faces regulatory headwinds. Alphabet lost a U.S. Department of Justice antitrust lawsuit in August 2024, raising concerns about potential business divestitures.
Some investors worry about Alphabet’s $75 billion in planned capital expenditures for 2025. These investments could lead to higher depreciation expenses and lower profit margins.
Despite these challenges, Alphabet maintains strong fundamentals. The company is aggressively integrating advanced AI capabilities across its product suite, particularly in Search.
The AI Overviews feature in Search has helped drive up commercial queries. This translates to higher returns for advertisers and benefits Alphabet’s core advertising business.
Google Cloud key growth driver
Google Cloud is emerging as a key growth driver. Its revenue soared 30% year over year to $12 billion in the fourth quarter of 2024.
At the close of 2024, Google Cloud held a 12% share of the global cloud infrastructure market. This represents an increase of 1 percentage point year over year.
YouTube continues to show impressive growth. Its advertising revenue increased 14% year over year to $10.5 billion in the fourth quarter.
Alphabet shares are currently trading at 5.9 times sales, lower than their historical price-to-sales ratio of 6.04. The stock trades at 21.1 times trailing-12-month earnings, below its five-year average of 24.6.
The company has demonstrated resilience in the past. After major market downturns, Alphabet stock has typically recovered and reached new highs.
With its strong fundamentals, expanding cloud business, and push into cybersecurity through the Wiz acquisition, Alphabet appears well-positioned despite current market uncertainties.
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