Alphabet employees forming the Google G. Image source: Alphabet.

Alphabet (GOOG 1.06%) (GOOGL 1.08%) has been on a share buyback spree this year. Throughout the first six months of the year, the technology giant has repurchased nearly $3.7 billion in shares, nearly 5.2 million shares of Class C stock. This is a relatively new phenomenon for the Mountain View, Calif., company, considering it didn't repurchase any shares in fiscal 2014 and 2013.

Last year, Alphabet's board of directors had a change of heart in regard to its capital return policies and authorized nearly $5.1 billion in repurchases. In January, Alphabet doubled down and authorized an additional 514,000 shares to be added to the company's existing buyback program. It appears the company has quickly plowed through the initial authorized dollar figure by repurchasing approximately $5.5 billion in the last 1.5 fiscal years.

Period1H 2016FY 2015FY 2014FY 2013
Repurchase (billions) $3.69  $1.78 -- --
Shares repurchased (millions) 5.2 2.4 -- --
Cost/share $710.19 $741.67 -- --

Data source: Alphabet financial filings. 

When Alphabet announced its planned buyback, I wrote a bearish argument against the move. My aversion was mostly for historical reasons and not a reflection on Alphabet's management. On average, companies are about as irrational as the average investor when it comes to share repurchases, buying shares at the top of the market and eschewing buybacks during recessions, when valuations were historically low. In many cases, including Alphabet's, share counts continue to increase even with buybacks because of the dilutive effect of share-based compensation.

Lucky for investors, Alphabet didn't take my advice into consideration, because C shares have rallied nearly 8% over the weighted average buyback price. At this point, investors should be happy Alphabet repurchased their shares.

Weighted Average Share PriceCurrent Price*Premium Over Buyback Price
$720.13 $780.35 8.4%

*Alphabet C Shares (GOOG) as of close of market, 9/7/16.

Alphabet should continue to push higher

For investors, company buybacks come down to one simple question: Did the company overpay for its own shares? So far, it seems like Alphabet did not. There are a few reasons I think Alphabet has further room to run.

First, the company's core business -- Google's search, display advertising, and member websites -- are doing well. Over the first six months of 2016 Alphabet, grew Google-related revenue 19% on a year-on-year basis. Google stands to benefit from the rapid shift to digital advertising because of the growth in mobile ads. Last year, eMarketer reported that Google took in 16% of all digital display revenue. Continued ad spend away from television to digital outlets should provide tailwinds to the company's top and bottom lines.

The second reason is the company's new fiscal prudence. Recent articles have described Alphabet's loss-producing other bets segments as a "mess." It seems the majority of these complaints are related to falling headcounts and a more tight-fisted approach in regard to expenses.

Alphabet CFO Ruth Porat. Image source: Alphabet.

Alphabet, after CFO Ruth Porat took the reins, has installed fiscal discipline and "tight governance" in regard to these other bets. And that makes sense for investors. Throughout the first six months of 2016, other bets reported operating income losses of $1.6 billion, versus $13.2 billion in operating income for the Google segment. Alphabet would have had 10% higher operating profit if the company simply didn't have these other bets.

This could quickly change, of course, in the event one of these bets becomes the next must-have device or technology, but it seems the company is being more prudent with these companies until a path to profitability is assured. A strong core business and increased fiscal prudence should allow Alphabet to continue to grow earnings, and its share price should follow.