Alphabet's Q2 Earnings: A Valuation Opportunity Amid AI Concerns

Alphabet (GOOGL) is set to release Q2 earnings on July 23, with a 20x forward earnings multiple, well below its 10-year median of 25.8x. Despite investor skepticism about search cannibalization from AI tools, Alphabet's search business has yet to show significant erosion. Analysts expect Q2 revenues of $79.25 billion, up 11.06% YoY, and EPS of $2.14, up 13.2% YoY. Alphabet has a Zacks Rank #3 (Hold) and a potential earnings beat of 0.87%.

Alphabet Inc. (GOOGL), the parent company of Google, is set to release its second-quarter 2025 earnings on July 23, 2025. The earnings will be closely watched by investors and analysts, with a forward earnings multiple of 20x, significantly lower than the 10-year median of 25.8x. Despite investor skepticism about the potential cannibalization of Google's search business by AI tools, Alphabet's search segment has shown resilience.

Analysts are expecting Alphabet to report revenues of $79.25 billion for Q2 2025, representing an 11.06% year-over-year (YoY) increase. The earnings per share (EPS) is projected to be $2.14, up 13.2% YoY. These projections suggest a potential earnings beat of 0.87% [1]. Despite the growth expectations, Alphabet has a Zacks Rank #3 (Hold), indicating a cautious outlook from analysts.

Alphabet's search and advertising business has been a key driver of growth. The company's dominant position in online search and advertising has been challenged by the rise of AI chatbots like ChatGPT. However, Alphabet has been proactive in countering these threats by launching its own AI models, such as Gemini 2.5 Pro. The integration of AI capabilities into Google Search has reached 1.5 billion monthly users, demonstrating the company's ability to enhance its existing products [1].

Google Cloud, Alphabet's cloud computing division, is also expected to contribute significantly to the company's growth. The cloud business has been gaining market share from competitors like Amazon and Microsoft. Analysts expect the cloud division to expand revenue by 26% YoY in Q2 2025 [1]. The proposed acquisition of Wiz for $32 billion is also expected to enhance Google Cloud's security capabilities, addressing a key consideration factor for businesses selecting cloud providers [1].

Investors will be closely monitoring Alphabet's ability to navigate regulatory risks and maintain its competitive edge in the face of increased competition. The company faces significant anti-trust challenges across multiple jurisdictions, which could impact its business model. Court rulings from ongoing remedies trials could have substantial consequences for Google's operations [1].

Wall Street sentiment remains largely positive, with 43 out of 55 analysts maintaining 'buy' or 'strong buy' ratings. However, the average target price has declined from approximately $215 in March to $202.05, reflecting increased uncertainty [1]. The technical setup suggests that the earnings announcement will be pivotal for near-term price direction. Traders should monitor both the fundamental results and the stock's reaction to key technical levels for trading opportunities [1].

In conclusion, while Alphabet faces challenges from AI competitors and regulatory risks, the company's strong fundamentals and growth prospects in cloud computing and AI integration suggest a cautious but optimistic outlook for its Q2 2025 earnings.

References:
[1] https://www.ig.com/en/news-and-trade-ideas/Google-Q22025-earnings-250716
[2] https://www.cnbc.com/2025/07/22/what-major-analysts-think-about-google-parent-alphabet-ahead-of-earnings.html