Alphabet's Stock Rises by 15% in a Month, Wondering if This Momentum Continues Following Impressive Earnings?
In Q2 2025, Alphabet, the parent company of Google, reported a 14% year-over-year revenue increase to $96.4 billion and a 22% rise in earnings per share to $2.31, surpassing analyst expectations [1][2][3].
Key drivers of this growth include:
- Google Cloud revenue surged 32% to $13.6 billion, fueled by demand for cloud infrastructure, AI infrastructure, and generative AI solutions [1][2][3].
- Google Services revenue, including YouTube ads and Google Search, grew 12% to $82.5 billion, with YouTube ads alone generating $9.8 billion in revenue [1][2].
- Operating margin held strong at 32.4%, with net income climbing 19% to $28.2 billion, demonstrating efficient expense management despite some legal-related charges [1][2][3].
Alphabet's investments in AI technology, especially via Google Cloud Platform and generative AI services, are significant growth drivers. The CEO noted a notable increase in large-scale deals ($1 billion+) and new Google Cloud customers, underscoring robust demand in the sector [4].
Notably, Alphabet's video generation model, Veo 3, has produced over 70 million videos since May. Google Search revenue came in at $54.19 billion, an 11.7% increase year over year.
The company's AI tools have free, basic versions, and more advanced subscription services. Alphabet is investing heavily in Google Cloud, with a 2025 capex budget of $85 billion, with two-thirds of this investment going towards servers, and one-third towards data centers and networking equipment.
However, some uncertainties remain, such as regulatory risks, AI’s rising energy consumption, and the balance between innovation and climate responsibilities moving towards 2030 [1]. The "Other Bets" segment still operates at a loss, though not large enough to offset core growth.
Despite these uncertainties, Alphabet’s strong earnings growth, dominant position in cloud and AI, and diversified revenue streams contribute to it being a strong foundational growth stock at present. Investors should consider the usual market and regulatory risks alongside these positive fundamentals.
Alphabet's stock price increased by 15.2% in the month leading up to its second-quarter earnings report, and has roughly doubled over the last three years, while earnings have soared 86.5%. The company's price-to-earnings ratio remains compressed at 20.6, lower than its 10-year median of 28.6. Alphabet AI tools have free, basic versions, and more advanced subscription services.
After reporting earnings on July 23, Alphabet continued to climb higher. It's important to note that while Alphabet isn't as cheap as it used to be, its earnings growth keeps its valuation in check. Google Search is not declining; it is growing nicely.
[1] Alphabet Q2 2025 Earnings Report: Key Takeaways - The Verge (www.theverge.com) [2] Alphabet Q2 2025 Earnings: Google Cloud Revenue Jumps 32% - CNBC (www.cnbc.com) [3] Alphabet Q2 2025 Earnings: Revenue and Earnings Beat Estimates - Yahoo Finance (finance.yahoo.com) [4] Alphabet CEO Sundar Pichai: Google Cloud is a $1 trillion opportunity - CNBC (www.cnbc.com)
- Alphabet's significant investments in AI technology, particularly through Google Cloud Platform and generative AI services, have boosted its growing revenue and earnings, making it an attractive option for investors in the finance and investing sector.
- The CEO's emphasis on the increase in large-scale deals ($1 billion+) and new Google Cloud customers illustrates a robust demand for technology services in finance and investing, further fueling Alphabet's growth trajectory.
- Google’s growing AI tools, such as the video generation model Veo 3, and the company's focus on investing in Google Cloud with a 2025 capex budget of $85 billion, demonstrate Alphabet's commitment to expanding in the technology-driven finance and investing domain.
