Alphabet Earnings (GOOG) Beats The Street – AI, YouTube and Cloud Strength

Alphabet Inc. (NASDAQ: GOOG) delivered a resounding performance in its second quarter 2025 earnings report, exceeding analyst expectations and setting up the stock for a move higher.

The stock is trading at $197.09 early in the pre-market, up 2.91%, the underlying strength of Alphabet's core businesses and its aggressive push into artificial intelligence.

The tech giant reported revenue of $96.43 billion, a 14% jump year-over-year, handily beating the consensus estimate of $94.02 billion.

Earnings per share (EPS) came in at $2.31, comfortably exceeding the $2.19 anticipated by analysts.

This stellar performance was driven by robust growth across key segments, particularly Search, YouTube, and Google Cloud.

CEO Sundar Pichai emphasized the transformative impact of AI on the company's operations. “We had a standout quarter, with robust growth across the company,” Pichai stated during the earnings call. “We are leading at the frontier of AI and shipping at an incredible pace. AI is positively impacting every part of the business, driving strong momentum.”

The numbers back up Pichai's claims. Google Search and other revenue surged to $54.19 billion, up from $48.51 billion last year, demonstrating the continued dominance of Google's core search business and the successful integration of new AI-powered features.

The launch of “AI Mode” in the U.S. and India has been met with positive reception, and AI Overviews are now utilized by over 2 million monthly users, indicating a growing appetite for AI-enhanced search experiences.

YouTube also continued its impressive growth trajectory, with advertising revenue reaching $9.8 billion, compared to $8.7 billion in the same quarter last year. The platform's success in monetizing short-form video content is particularly noteworthy. YouTube Shorts now generate as much revenue per watch hour as traditional in-stream videos, signaling a significant shift in viewer behavior and advertising strategies.

The Vio 3 video generation tool has also seen explosive adoption, with over 70 million videos created since May. Additionally, Alphabet is pleased with the increase in subscriptions, which received a boost from Google AI Pro and Ultra plans.

Google Cloud continues to be a major growth engine for Alphabet. Revenue for the cloud division reached $13.62 billion, a substantial increase from $10.35 billion in the prior year. With an annual revenue run-rate now exceeding $50 billion, Google Cloud is rapidly gaining market share and solidifying its position as a leading cloud provider.

To capitalize on this momentum, Alphabet plans to significantly increase its capital expenditures in 2025 to approximately $85 billion, primarily focused on expanding its cloud infrastructure.

Waymo, Alphabet's autonomous driving arm, achieved a major milestone, surpassing 100 million miles autonomously driven on public roads. This achievement underscores Waymo's technological leadership in the self-driving space and its potential to disrupt the transportation industry.

While the market is currently enamored with Alphabet's AI initiatives, a closer examination reveals potential vulnerabilities. The “AI Mode” and “AI Overviews,” while generating buzz, could cannibalize existing search traffic and ultimately reduce advertising revenue if users find the AI-generated answers sufficient and bypass traditional web links.

Moreover, the long-term ethical implications of AI-driven search and content creation remain largely unaddressed, potentially leading to future regulatory challenges and reputational risks.