TLDR
- Alphabet stock rose nearly 3% in premarket trading after beating quarterly earnings expectations driven by strong cloud and search revenue growth
- The company increased its 2025 capital spending forecast by $10 billion to $85 billion to meet rising AI and cloud demand
- Google Cloud revenue jumped almost 32% in Q2, surpassing analyst expectations as AI investments began paying off
- AI Mode reached 100 million monthly users in just two months, while Gemini surpassed 450 million monthly users
- At least 17 brokerages raised their price targets on Google stock, with Citi increasing theirs to $225 from $203
Alphabet shares climbed nearly 3% in premarket trading Thursday following the Google parent’s better-than-expected quarterly results. The tech giant delivered strong performance across its key business segments while ramping up AI investments.
The company beat analyst estimates with solid revenue growth from both its search and cloud divisions. Google’s advertising business, which makes up about three-quarters of total sales, posted 10.4% revenue growth despite economic headwinds.
But it was the cloud computing unit that really caught investors’ attention. The division delivered an almost 32% jump in second-quarter revenue, crushing expectations as the company’s AI investments started to show real returns.
Alphabet announced plans to increase its 2025 capital spending forecast by $10 billion to $85 billion. The company also hinted at even higher spending next year as it races to meet soaring cloud demand.
This spending surge reflects Google’s push to stay competitive in Silicon Valley’s heated AI battle. The company has been working to catch up after appearing to fall behind OpenAI and Microsoft last year.
CEO Sundar Pichai highlighted some impressive user adoption numbers during the earnings call. AI Mode reached 100 million monthly active users in the U.S. and India just two months after its wider rollout in May.
The company’s Gemini AI model has also gained traction with over 450 million monthly users. These numbers show Google’s AI products are finding their audience despite intense competition.
Strong Cloud Performance Drives Growth
Google Cloud’s 32% revenue jump wasn’t just a number on a spreadsheet. It represents real progress from the company’s investments in custom chips and AI technology.
The cloud unit has been a key focus area as Google competes with Amazon Web Services and Microsoft Azure. Strong cloud results often signal good news for these rivals too, as they indicate healthy enterprise demand.
Bernstein analyst Mark Shmulik said Google “came back fighting this quarter.” He noted that investors have been pushing the company to get more aggressive in the AI race.
Wall Street Responds Positively
At least 17 brokerages raised their price targets on Alphabet stock following the results. The median target now sits at $210 per share.
Citi analysts bumped their target to $225 from $203, citing improving search monetization trends. They praised several aspects of the results, including faster product development cycles and growing cloud revenue.
The analysts also liked the company’s plan to spend $85 billion on AI development this year. This represents a major increase from earlier spending targets.
Wall Street’s average price target stands above $216, according to Visible Alpha data. This suggests analysts see more upside potential for the stock.
Some concerns remain about the higher spending levels. Investors worry about returns on these massive AI investments, especially given ongoing regulatory challenges.
Alphabet faces legal battles over its search and ad-tech businesses. Regulators are pushing to break up what they see as illegal monopolies in these markets.
The company’s stock has lagged other tech giants this year. Alphabet shares are up just 0.5% in 2025, trailing Microsoft’s 20% gain and Meta’s 21% increase.
Despite the strong earnings, some analysts remain cautious about near-term prospects. Matt Britzman from Hargreaves Lansdown noted uncertainty around AI’s impact on core search revenue.
The company’s forward price-to-earnings ratio of 18.88 trails both Microsoft at 33.03 and Amazon at 33.31. This suggests the market still has questions about Alphabet’s growth trajectory.
Google’s advertising business showed resilience with its 10.4% revenue growth, a positive sign for other ad-dependent companies like Meta and Snap. The results came despite economic uncertainty from trade tensions and geopolitical issues.
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