Why Alphabet Stock Is Falling Today

Shares of the technology giant Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) were sliding this morning after the company announced it's purchasing the cloud security company Wiz for $32 billion in an all-cash deal.

Wiz will become part of Google Cloud when the deal closes later next year. Investors may have been disappointed by the size of the acquisition, which is the company's largest to date. Alphabet's stock was down by 3.2% as of 11:37 a.m. ET.

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Know your worth

Alphabet has been pursuing Wiz for a while and offered $23 billion to acquire the company last year. Wiz walked away from that offer, seemingly believing it was worth more money and opting instead to pursue an initial public offering (IPO).

That turned out to be the right move for Wiz because Alphabet upped its offer by an additional $9 billion to finally make the deal happen. Alphabet says Wiz will become an important part of its Google Cloud security offerings and Google Cloud CEO Thomas Kurian said in a press release: "Google Cloud and Wiz share a joint vision to make cybersecurity more accessible and simpler to use for organizations of any size and industry. Enabling more companies to prevent cyber attacks, including in very complex business software environments, will help organizations minimize the cost, disruption and hassle caused by cybersecurity incidents."

Google is the third-largest cloud player after Amazon and Microsoft, so the acquisition may be a way for the company to catch up to its rivals and offer better security options. Alphabet said Wiz's security features will continue to work on Amazon and Microsoft cloud platforms, which will allow Alphabet to benefit from Wiz no matter which cloud platform it runs on.

That's a lot of dough

Investors may have been disappointed with Alphabet's large $32 billion cash deal for Wiz. The company is paying nearly 40% more for Wiz than it was trying to acquire it for last year, which may come across as overpaying.

As of September 2024, Wiz had an annual recurring revenue of $500 million, but investors may be questioning such a large deal at a time when Alphabet is also spending billions to keep pace in the artificial intelligence race.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, 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.