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Wall Street’s Take on 2Q
Wall Street is responding positively to Alphabet’s Q2, with Barclays raising its price target to $235 (from $220), citing “a lot of great metrics,” including accelerating Cloud revenue and strong Search paid clicks. The firm remains Overweight but flags the pending DOJ remedy decision as a watchpoint.
BofA raised its target to $217, calling the quarter “another strong one,” and arguing that AI is expanding—not cannibalizing—Search monetization. Analyst Justin Post believes the Street may be underestimating long-term upside from Google’s AI stack.
Truist bumped its target to $225, highlighting resilience across Search, YouTube, and Cloud despite macro uncertainty and competitive AI chatter. They noted strong Shorts engagement and continued monetization gains via “All-in-One” ad formats.
Consensus is forming around this narrative: Alphabet is navigating the AI transition from a position of strength, but the magnitude of CapEx ($85B FY25 guidance) will remain a closely watched tension point for investors.
Where Is Search In an AI World
Search showed it’s still the bedrock of Alphabet’s business — and now, AI Overviews and Mode are enhancing that strength, not diluting it. Management said Overviews are lifting global queries by 10% for eligible search types.
I’ve been waiting to see proof that AI-native features could drive usage rather than displace it — this is a tangible step in that direction. With 100M+ MAUs on AI Mode already, and strong mobile engagement via tools like Lens and Circle to Search, Alphabet’s pivot to more agentic and multimodal search experiences looks credible.
These aren’t experiments anymore — they’re scaling products. If Google can keep monetization flat or higher on these AI-infused results (which Philipp Schindler said they are), that’s a huge validation of the model. I’m becoming incrementally more bullish on Search as a defensive and offensive asset, even with Gemini standing alongside it.
Alphabet (Nasdaq:GOOG) has delivered one of its most strategically revealing quarters yet — a strong affirmation that its pivot to AI-first monetization is not just a product shift, but now a financial engine. Revenue surged 14% year-over-year to $96.4 billion, while adjusted EPS came in at $2.31, beating estimates by more than 5%. Growth came from across the business: Search, YouTube, and especially Google Cloud, which saw revenue rocket up 32% as enterprise demand for Gemini-based tools surged.
Search monetization showed notable strength, supported by expanding adoption of AI Overviews and AI Mode, now reaching over 100 million monthly users. Management emphasized that AI Overviews are lifting query volume — by 10% globally for applicable searches. Meanwhile, YouTube Shorts has hit a monetization milestone, now matching or exceeding in-stream ad revenue per watch hour in major markets like the U.S.
But the quarter wasn’t without trade-offs. Alphabet’s capital expenditures spiked to $22.4 billion, and the company raised full-year guidance to $85 billion, up from $75 billion previously. That move, while intended to meet massive AI infrastructure demand, led to a sharp contraction in free cash flow — down 61% year-over-year to just $5.3 billion. Analysts flagged the ballooning depreciation and tight server supply as near-term concerns, even as longer-term cloud momentum remains intact.
CEO Sundar Pichai noted that Gemini now powers over 450 million monthly active users, and enterprise clients are scaling adoption: 85,000 companies now build with Gemini, including Salesforce, BBVA, and Target. The Cloud backlog reached $106 billion, and the company has already signed as many $1B+ cloud deals in 1H25 as in all of 2024.
Keep this window open as we post our breakdown Alphabet’s quarter live.
The post Complete Breakdown of Alphabet’s 2Q Earnings appeared first on 24/7 Wall St..
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Author: Joel South
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