To the outside world, Alphabet is a collection of data centers and algorithms. To an investor, it is a massive circulation system of equity. At the heart of this system is the RSU (Restricted Stock Unit)—the primary currency used to attract and retain the world’s elite AI talent.
But here is the catch: every time a Google engineer gets paid in stock, a tiny piece of your ownership is created out of thin air.
The Invisible Dilution
Alphabet doesn’t just pay in cash; it pays in Class C ($GOOG) shares. This is a strategic masterstroke for the founders. By using non-voting stock to pay employees, they can dilute the economic pool indefinitely without ever losing a single percentage of their voting control.
For the employee, it’s a golden handcuff. For the shareholder, it’s a constant “share count” leak. If left unchecked, this issuance of new shares would slowly erode the value of your position, making each of your shares represent a smaller and smaller slice of the profit pie.
The Buyback Treadmill
This is why Alphabet’s massive share buyback programs (often $70 billion or more) are so critical. A large portion of that capital isn’t actually “returning value” to you—it is simply running in place.
- Step 1: Issue new Class C shares to engineers (Dilution).
- Step 2: Use billions in cash to buy back shares (Anti-Dilution).
- The Result: Only the excess buyback—the amount spent above and beyond employee compensation—actually reduces the total share count and boosts your earnings per share (EPS).
The Pragmatic Lens
As a serious investor, you must look past the headline buyback numbers. The real metric is the Net Share Count Reduction.
At Third Pole Markets, we monitor the friction between employee incentives and shareholder value. We aren’t against RSUs—you want the best minds building Gemini—but we demand to know the cost. When you see Alphabet repurchasing shares, remember: they aren’t just rewarding you; they are cleaning up the “equity mess” created by their own payroll.
The Verdict: You aren’t just investing in a search engine; you are investing in a cycle of talent-for-equity. Understanding the RSU engine is the difference between being a passive passenger and a calculated owner of the empire.
