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Alphabet (GOOGL) is delivering impressive growth across its core businesses, thanks largely to its aggressive push into artificial intelligence (AI). For instance, Google’s parent company, Alphabet, delivered better-than-expected second-quarter financial results on Wednesday, July 23. Moreover, it once again achieved double-digit revenue growth across its key segments, including Search and YouTube advertising, Google Cloud, and subscription platforms and devices.
While the company’s fundamentals are strong, Alphabet stock hasn’t fully reflected this performance. With a market capitalization of around $2.3 trillion, GOOGL shares have underperformed the broader market in 2025. Legal and regulatory pressures, combined with intense competition in the AI space, have kept the market cautious. But Alphabet’s long-term AI strategy and its solid execution suggest there may be considerable upside from here.
AI Is Alphabet’s Growth Engine
What sets Alphabet apart is its end-to-end approach to AI. The company has invested heavily across the AI stack, spanning infrastructure and research to products and platforms, which is bearing fruit. It boosts user engagement, expands monetization opportunities, and enhances operating efficiency. In short, AI is now central to Alphabet’s growth narrative, and could push its share price higher.
The benefits of AI integration are evident in Google Search. AI is transforming how people interact with information online, allowing users to ask more complex questions. As a result, search volumes continue to rise. Features like AI Overviews, now reaching over 2 billion users globally, are driving this increased engagement. Meanwhile, the Gemini app, Alphabet’s flagship AI assistant, has attracted over 450 million monthly active users, with daily request volume up more than 50% quarter-over-quarter.
That AI-powered momentum is translating directly into revenue. Google Search and related businesses brought in $54.2 billion in Q2, marking a 12% increase from the year prior. Growth was broad-based, spanning multiple verticals.
Thanks to the AI, Google Cloud is also delivering stellar growth. The unit is witnessing solid product demand. Revenues increased by 32% to $13.6 billion in Q2, driven by growth in Google Cloud Platform (GCP) across core and AI products.
The company reported that deals worth over $250 million have more than doubled year-over-year in Q2 for the Cloud segment. Moreover, in just the first half of 2025, Alphabet matched its total number of $1 billion-plus deals from all of 2024. New customer growth for GCP surged nearly 28% quarter-over-quarter.
Overall, Cloud had another solid quarter, and the segment’s annual revenue run rate has crossed $50 billion. As the tech giant is seeing significant demand for its AI product portfolio, it is ramping up capital investment. Alphabet now plans to spend approximately $85 billion in capital expenditures (CapEx) in 2025, an increase from its previous estimate of $75 billion. Much of this is earmarked for server procurement and accelerated data center construction, reflecting heightened cloud usage and enterprise demand for AI capabilities.
YouTube is another growth engine for the company, with advertising revenues growing 13% to $9.8 billion in Q2. The platform is seeing rising engagement across both its advertising and subscription businesses. Shorts, Google’s short-form video feature, is gaining popularity, and services like YouTube Premium and Google One continue to build strong subscriber bases. Alphabet is also expanding its premium offerings to new markets, unlocking fresh revenue streams and supporting top-line growth.
A Trillion-Dollar Question: How High Can Alphabet Go?
With AI acting as a catalyst across every part of the business, Alphabet looks increasingly well-positioned to cross $3 trillion in market cap. While challenges remain, particularly around regulation and market competition, the fundamentals are compelling.
From a valuation perspective, GOOGL appears to be a relative bargain. GOOGL trades at a forward price-earnings (P/E) ratio of 19.9x and a price-sales (P/S) ratio of 6.6x. That’s significantly cheaper than peers like Microsoft (MSFT) (33.9x P/E), Apple (AAPL) (30.2x), and Amazon (AMZN) (36.3x), even as Alphabet delivers roughly comparable growth across key metrics.
Wall Street analysts are bullish about GOOGL stock and maintain a “Strong Buy” consensus rating. Further, the highest price target for Alphabet stock is $250, implying over 31% upside potential from current levels over the next 12 months.
In short, Alphabet’s strong earnings, strategic investments in AI, and attractive valuation make it an appealing stock to buy and hold for the long term.
