Why Alphabet's AI Dominance Makes GOOGL Stock a Top Pick

Alphabet Inc. (GOOGL) recently reported impressive Q2 results, with total revenue reaching $96.4 billion, up 14% YoY. Search and other revenues rose 12% to $54.2 billion, driven by retail and financial services. Net income climbed 19% to $28.2 billion, and EPS increased 22% to $2.31. Google Cloud generated $13.6 billion in revenue (+32% YoY) and nearly doubled its operating margin from 11.3% to 20.7%. With momentum building across all core segments, GOOGL stock could be the next big winner in the market's AI race.

Alphabet Inc. (GOOGL), the parent company of Google, recently reported impressive second-quarter (Q2) results, showcasing robust growth across its core segments. The company's total revenue reached $96.4 billion, marking a 14% year-over-year (YoY) increase, which exceeded Wall Street expectations of $94 billion [1]. Net income climbed 19% to $28.2 billion, while earnings per share (EPS) increased 22% to $2.31. Search and other revenues rose 12% to $54.2 billion, driven by retail and financial services, while Google Cloud generated $13.6 billion in revenue, up 32% YoY, and nearly doubled its operating margin from 11.3% to 20.7% [2].

Google Cloud's strong performance was driven by a 32% YoY growth in revenue, reaching $13.6 billion, and a significant increase in large enterprise deals. The number of Cloud deals over $250 million doubled, and Alphabet signed as many $1 billion+ deals in the first half of 2025 as it did in all of 2024 [2]. Additionally, the company's YouTube advertising revenue grew 13% YoY to $9.8 billion, further contributing to Alphabet's overall revenue growth [1].

Alphabet's capital expenditures (capex) forecast for 2025 was increased by $10 billion to $85 billion, primarily due to strong and growing demand for its Cloud products and services [1]. This increase is part of the company's strategy to expand its AI capabilities, which it expects to further increase in 2026 [1]. Despite the significant capex increase, Alphabet's overall operating margins remained broadly in line with last year, at 32% [2].

The company's search unit remains resilient, with Google Search commanding nearly 90% global market share outside China and continuing to drive strong ad revenue growth [2]. However, Alphabet is also testing AI-generated summaries at the top of search results, which could potentially impact its ad revenue in the long term [2].

Alphabet's self-driving car unit, Waymo, logged 71 million autonomous miles with passengers through March and is operating in five U.S. cities, including Phoenix, San Francisco, and Los Angeles [2]. Additionally, the weaker U.S. dollar provided a subtle boost to Alphabet's revenue this quarter, with currency effects adding a full percentage point to growth [2].

Alphabet's stock reacted positively to the earnings report, with shares up as much as 3% in after-hours trading. However, the market's initial enthusiasm was tempered by the significant increase in capex guidance, which reignited investor concerns about the cost and timeline of monetizing AI [1]. Despite this, Alphabet remains in a strong position, with a sticky user base, accelerating cloud deals, and a relatively attractive valuation [2].

In conclusion, Alphabet's Q2 results demonstrate the company's continued strength and growth across its core segments. While the significant increase in capex may raise concerns for investors, Alphabet's strong cash balance and continued profitability in Search and Cloud make it an attractive defensive tech play in the AI boom [2].

References:
[1] https://www.cnbc.com/2025/07/23/alphabet-google-q2-earnings.html
[2] https://www.home.saxo/content/articles/equities/alphabet-earnings-five-key-takeaways-investors-need-to-know-24072025