(Reuters) - Alphabet said on Tuesday it would buy Wiz for about $32 billion in its biggest deal as the Google parent doubles down on cybersecurity to sharpen its edge in the cloud-computing race against Amazon.com and Microsoft.

The all-cash buyout comes after Wiz rejected a $23 billion bid from Alphabet last year due to concerns about antitrust approvals and its aim to focus on an initial public offering.

Acquiring Wiz will help Google bolster its cloud business with AI-powered cybersecurity solutions that companies use to remove critical risks, helping it compete better in an industry benefiting from the rise of generative AI services like ChatGPT.

"Cloud is more important than ever, and attackers are not slowing down. They are already using the most innovative technologies to move faster," said Wiz CEO and co-founder Assaf Rappaport, who had called Google's previous offer "humbling".

While a tough regulatory climate in 2024 had hampered such large-scale deals, Wall Street is optimistic that a shift in antitrust policies under U.S. President Donald Trump could reignite dealmaking momentum.

One of the fastest-growing software startups, Wiz was valued at $12 billion in a funding round last May. It works with cloud providers such as Amazon Web Services, Microsoft's Azure as well as Google Cloud and counts Morgan Stanley, BMW and luxury powerhouse LVMH among its customers.

After the deal closes, Wiz will join Google Cloud business which generated more than $40 billion in revenue in 2024 and has outpaced growth in the search business in the recent years.

Wiz's products will continue to be available across all other major cloud services. Alphabet expects the deal to close in 2026, subject to regulatory approvals.

D.A. Davidson analyst Gil Luria said the higher price is based on another year of exponential growth for Wiz.

"For Google to be able to compete with Microsoft Azure for enterprise customers, it needs to be able to offer a deeper suite of services, including security software," he said.

This is the not the first time Google has struck a big deal for a cybersecurity company. In 2022, it bought Mandiant for $5.4 billion, outbidding Microsoft in a high-stakes contest.

Interest in the cybersecurity industry has been rising since last year's global CrowdStrike outage roiled operations across industries, prompting companies to spend more on safeguarding their online domains.

Google had $23.47 billion in cash and cash equivalents as of Dec. 31, implying it might have to seek financing for the deal.

The company, which has kept aside $75 billion in capital expenditure for 2025 mostly for AI investments, said on Tuesday its capital allocation plans remain unchanged.

Shares of Google were down nearly 3% in early trading amid broader market weakness. They had risen about 35% last year, but have lost 13% this year on investor worries over its hefty AI spending against the backdrop of China's lower-cost DeepSeek.

(Reporting by Deborah Sophia and Zaheer Kachwala in Bengaluru; Editing by Anil D'Silva and Arun Koyyur)