Alphabet (GOOGL) Earnings Preview: Cloud and AI Drive Growth

[Redator]

Alphabet is set to release its Q2 2025 financial results after the U.S. market closes on Wednesday, July 23, 2025.

Alphabet is facing slower growth in advertising but is seeing strong results in its cloud business and making big investments in artificial intelligence (AI). However, it is also dealing with increasing antitrust scrutiny.

What to Expect?

In Q1 2025, the company delivered strong results, with revenue up 12% year-over-year to $90.2 billion and net income jumping 46% to $34.54 billion. Earnings per share (EPS) rose 49% to $2.81, boosted by a $9.8 billion gain from equity investments.

For Q2 2025, growth is expected to slow. Analysts predict revenue of $93.8 billion, a 10.7% increase from last year. Net income is forecasted to drop from Q1 to $26.5 billion but still grow 12.2% year-over-year. Operating margins are expected to improve to 34.1%, up from 32.4% in Q2 2024.

Source: Created by Zain Vawda, Google Gemini

Key Areas to Focus On

Advertising is Alphabet's main revenue source, making up 74% of Q1 2025 revenue. Google Search revenue grew 10% to $50.7 billion, and YouTube ads rose 10% to $8.9 billion, though Search ad growth slowed to single digits for the first time since mid-2023. Analysts expect ad revenue growth to slow further, with Q2 growth projected at around 10.6%-10.8%.

AI Overviews in Google Search, which generate summaries, now reach 1.5 billion users monthly and have increased commercial queries. While early revenue from this is small, it has big potential, with user numbers possibly hitting 4 billion by Q3. YouTube is also using AI to improve shopping, content discovery, and ad targeting. However, competition and economic challenges may limit ad budgets.

Google Cloud is growing fast, with Q1 2025 revenue up 28% to $12.3 billion, driven by demand for AI and enterprise solutions. Q2 revenue is expected to reach $12.9 billion, a 25%-28% increase. Operating margins improved to 17.8% from 9.4% last year. Partnerships, like OpenAI using Google Cloud for ChatGPT, are boosting its growth and positioning it as a key driver for Alphabet.

Source: Created by Zain Vawda, Google Gemini

AI Investments

Alphabet is investing heavily in AI, planning to spend $75 billion in 2025 to expand data centers and improve AI services like its Gemini model, chips, and servers. These investments are key to staying competitive in the fast-growing AI market.

The Gemini AI models, used in Search, YouTube, and Workspace, are central to Alphabet’s growth. Gemini 2.5, launched in Q1, excels in reasoning and coding. The Gemini ecosystem now spans 15 platforms with over 500 million users. AI Overviews aim to make products more personalized and engaging, laying the groundwork for future revenue, even though direct earnings from these features are still small.

Source: Created by Zain Vawda, Google Gemini

Other Bets

Alphabet’s "Other Bets" segment, including Waymo (self-driving cars) and Verily (healthcare), earned $450 million in Q1 2025, down from $495 million last year, with a $1.23 billion loss. Waymo is growing fast, completing 250,000 weekly rides in four U.S. cities, a huge jump from 2023. It’s partnering with Uber to reach 10 million users in Austin and Atlanta and licensing its tech to automakers. Waymo’s value was $45 billion in 2024 and could hit $100 billion by 2030 if it captures 5% of the $1.5 trillion self-driving market.

Forward Outlook

Management’s outlook for the second half of 2025 and beyond will be closely watched, especially for updates on advertising revenue under economic pressures and progress in monetizing AI. Analysts expect Google Cloud to grow faster in the second half of 2025 as more capacity becomes available.

Alphabet’s long-term growth relies heavily on its AI and cloud businesses. Its "full-stack AI innovation" sets it apart from competitors. While AI earnings are currently small, features like AI Overviews and Gemini models have big future potential.

Google Cloud is expected to keep growing, driven by AI demand, better integration of AI tools, and acquisitions like Wiz to improve cloud security. The "Other Bets" segment, especially Waymo, provides opportunities for long-term growth and diversification.

Source: Created by Zain Vawda, Google Gemini

Technical Analysis

From a technical standpoint, Alphabet shares have been on a steady move higher since bottoming out at the beginning of April at around the 140.00 mark.

Over the last two days, the share price has struggled to break above a key resistance level at 191.81.

The RSI period 14 is currently breaking back below overbought territory which suggest a change in momentum may be upon us.

Could this be the start of a deeper retracement?

Immediate support rests at 181.00 before the 165.28 handle comes into focus.

A break above resistance at 191.81 will look toward the 200.30 handle before the 2025 highs at 207.00 comes into focus.

Alphabet (GOOGLE) Daily Chart, July 23, 2025

Source: TradingView

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