Alphabet Inc. (GOOGL), the parent company of Google, recently posted strong Q2 2025 earnings, surprising the market with robust revenue and earnings growth but stirring debate with aggressive capital expenditures. Despite the upbeat financials, the Alphabet share price saw limited movement in the immediate aftermath, highlighting investors’ cautious stance amid the AI investment boom.
Alphabet Earnings Beat Estimates But CapEx Raises Eyebrows
Alphabet reported revenue and earnings above Wall Street expectations, bolstered by impressive gains across its Cloud and Search divisions. Total revenue climbed significantly year-over-year, driven largely by Google Cloud’s 32% annual growth. Google earnings also benefited from strong ad revenue on both Search and YouTube, with the latter growing subscriptions and adapting well to shifting user behavior.
However, GOOGL stock reacted with hesitation. The reason? A dramatic increase in capital expenditures. Alphabet spent $22.4 billion in Q2, far surpassing expectations of $18.2 billion. Moreover, it revised full-year 2025 CapEx guidance to a massive $85 billion, up from $75 billion just three months ago. This unexpected hike led some analysts to temper their bullish stance on GOOG stock, as questions loom over the timeline for returns on Alphabet’s AI spending spree.
Google Search and Cloud: Still the Core Engines
Despite increasing competition from AI-native platforms like ChatGPT and Perplexity, Google stock remains backed by the resilience of its core Search business. In Q2, Search ad revenue grew 12% YoY, beating estimates and reaffirming Alphabet’s dominance in the sector. The rollout of AI summaries in Search could alter monetization strategies in the future, but for now, Google maintains a 90%+ global search market share.
Google Cloud, meanwhile, emerged as the standout performer. It generated $13.6 billion in revenue, with enterprise contracts over $250 million doubling in volume. Alphabet’s Gemini AI model, now embedded across its cloud tools, is drawing attention from major businesses, further boosting the Alphabet share price narrative as a cloud and AI hybrid play.
Alphabet’s Valuation: A Defensive Tech Play?
Amid AI enthusiasm across Wall Street, Alphabet trades at a relatively modest forward P/E below 20x—making it one of the more attractively valued stocks in the Magnificent Seven cohort. The combination of consistent profitability, a robust cash position, and stable user base makes GOOGL stock increasingly appealing to investors seeking reliable compounders with AI optionality.
The market divergence is becoming clearer. While Nvidia and Microsoft surge on proven AI monetization, Alphabet earnings suggest a more methodical but fundamentally sound path. The company is investing heavily, but unlike Tesla or Apple, it boasts a profitable foundation that supports these forward-looking expenditures.
Other Bets and Currency Tailwinds
Alphabet’s speculative ventures, particularly Waymo, also drew attention. Waymo has now logged 71 million autonomous miles and operates in five U.S. cities. Although the “Other Bets” segment posted a $1.2 billion loss, it holds promise if regulatory hurdles are resolved. Meanwhile, a weaker U.S. dollar provided a subtle boost, adding about 1% to international revenue growth—something that could continue benefiting Google share price in coming quarters.
Conclusion: A Watch-and-Wait Story for Investors
Alphabet has clearly embraced the AI race, but with a more balanced and infrastructure-heavy approach. Investors appear to be adopting a wait-and-see attitude. The long-term success of these AI investments will determine whether GOOG stock resumes an upward trajectory or faces further scrutiny.
For now, the company’s diversified revenue streams, resilient core businesses, and measured AI rollouts keep it in a favorable position within the tech landscape.
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