After trying and failing to acquire Wiz last year, Alphabet (GOOGL -0.65%) (GOOG -0.72%) has reached a deal to buy the fast-growing cybersecurity company. It is paying a steep price of $32 billion, up from the the $23 billion it offered last year. It will also pay Wiz employees $1 billion in retention bonuses.

Wiz backed out of the deal last year over antitrust concerns, but expects a more favorable environment under the Trump administration.

In my view, this deal looks like a game changer for Alphabet. Let's examine why.

Adding to a collection of strong businesses

The acquisition of Wiz adds yet another strong business to Alphabet. While best known for its Google search engine, Alphabet actually has a strong collection of market-leading and emerging businesses. It's the leading digital advertiser in the world, where it not only serves ads for Google, but for its other properties and third-party sites as well.

Its YouTube streaming service is the most watched streaming platform in the U.S. and the fourth-largest digital advertising platform in the world. It owns the world's third-largest cloud computing company in Google Cloud, which has been its fastest-growing segment. It has also taken leading positions in emerging technologies such as quantum computing and autonomous driving with its Waymo unit.

Wiz only adds to Alphabet's collection of leading tech businesses and further highlights that Alphabet is much more than search. In addition, it is purchasing a fast-growing company in a booming field.

Wiz is a leader in cloud detection and response (CDR) security, where its Cloud Native Application Protection Platform (CNAPP) uses artificial intelligence (AI) to quickly scan and identify vulnerabilities across the cloud environment. Its platform connects to every cloud environment and covers every aspect of cloud security.

It's also been developing new products as it continues to innovate. Two launched in the past year include a code-to-cloud security solution called Wiz Code, and a detection and response solution for SecOps (security operation) teams called Wiz Defend. This should help the company grow with its existing customer base over time as it adds more solution modules.

Wiz counts the three biggest cloud computing companies -- Google Cloud, Amazon's AWS, and Microsoft's Azure -- among its customers, as well as half of the Fortune 100. Large enterprise customers include Morgan Stanley, BMW, and LVMH.

Following the acquisition, Wiz will continue to partner with all cloud computing companies. However, owning Wiz should be a big boost to Alphabet's Google Cloud unit. It will strengthen Google Cloud's security offerings and should help differentiate it from the competition. Meanwhile, Alphabet will be able to sell Wiz's products into its large base of Google Cloud customers, as well.

Google Cloud has been Alphabet's fastest-growing segment, with revenue climbing 30% last quarter and segment operating income soaring 142%. Wiz should only increase the attractiveness of its cloud offering, given its strong reputation as a cloud cybersecurity provider. Cybersecurity threats are not slowing, and with the growth of cloud computing and AI, this deal helps set Alphabet apart.

Image source: Getty Images.

Time to buy the stock

The Wiz deal, assuming it closes, will be the largest in Alphabet's history. It's paying a hefty price tag believed to be around 60 times Wiz's 2024 annual recurring revenue of $500 million in 2024. However, Wiz has a very strong platform that is growing quickly, and Alphabet should be able to accelerate growth given its large installed Google Cloud customer base.

The deal should also help make Google Cloud more attractive to potential enterprise customers. This could help bolster growth not just from selling Wiz solutions, but from attracting new customers to Google Cloud.

Alphabet has done very well with acquisitions in the past, most notably with YouTube, which it acquired in 2006 for $1.65 billion. At the time, YouTube was an unprofitable start-up facing copyright concerns. It was also Alphabet's largest-ever acquisition when the deal closed. Last quarter alone, YouTube generated $10.5 billion in revenue.

Together with its early acquisition of cybersecurity company Mandiant, a leading cyber threat intelligence company, Alphabet is creating a world-class cybersecurity business. This just adds another growth lever to the company.

Given its growing array of top-notch businesses, Alphabet's stock is just way too cheap, trading at a forward price-to-earnings (P/E) ratio of under 18 times 2025 analysts' estimates.

GOOGL PE Ratio (Forward) data by YCharts.

Alphabet looks like a great buy at current levels, and once the dust from the market sell-off clears, investors should start to realize the extremely valuable set of assets the company has collected. The Wiz acquisition just adds to these strong businesses and should be a big growth driver in the years ahead.