Alphabet (NASDAQ: GOOGL) spent much of the past year lagging behind its mega-cap tech peers, weighed down by concerns over potential slowing advertising growth, increasing AI competition in search, and broader questions about its positioning in the future of tech. While tech giants like NVIDIA (NASDAQ: NVDA) and Meta (NASDAQ: META) surged to new highs, Alphabet’s stock remained muted, even as it traded well below its historical P/E levels.
Investor sentiment began shifting earlier this month. Buyers stepped in with the stock still trading at a discount and emerging signs of underlying business strength. Shares of Alphabet rallied nearly 15% in July ahead of its second-quarter earnings report, as expectations grew for a breakout performance. Those expectations proved to be well placed.
Advertising and Cloud Growth Drive Strong Quarter
Alphabet’s Q2 2025 results, released after the bell on July 23, delivered a resounding beat on both the top and bottom lines. Revenue surged to $96.43 billion, a 14% year-over-year increase that topped estimates of around $94 billion. Earnings per share came in at $2.31, up 22% from the same period last year and well above the expected $2.17.
The report showed impressive growth across the board, but advertising and cloud services stole the show. Google Cloud revenue increased 32% to $13.62 billion, surpassing forecasts and propelling annual recurring revenue for the segment above $50 billion. YouTube also delivered, with ad revenue rising 13% to $9.79 billion.
Perhaps most importantly, Alphabet’s core Google Search business, which had been the source of considerable bearish sentiment due to concerns about AI-related disruptions, grew 11.7%. That far exceeded the 8% analysts had expected. That single metric helped ease investor worries that Alphabet’s dominance in search was under threat, at least for now.
AI, Subscriptions, and Future Investment
Alphabet’s AI efforts were also a key focus in the quarter. The company highlighted that AI Overviews now serve over two billion monthly users, while the Gemini app has reached 450 million monthly active users. These figures underscore Alphabet’s ongoing pivot to AI integration across its products, suggesting it’s playing offense, not defense, in the emerging AI race.
Meanwhile, its Subscriptions, Platforms, and Devices segment posted strong 20% growth, generating $11.2 billion in revenue. Even its “Other Bets” division, which includes experimental projects like Waymo, reported $373 million in revenue, though it continued to post a loss of $1.24 billion.
Capital expenditures (CapEx) were another major headline. Alphabet has raised its full-year CapEx guidance to $85 billion, a $10 billion increase from previous estimates, primarily to support growing demand for its AI and cloud infrastructure.
Alphabet’s Reversal Is Now Confirmed
Alphabet’s Q2 report marks a strong quarter and may signal a lasting turnaround. After months of underperformance and doubt, the results showed strength where it mattered most: advertising, cloud, and search. The company’s ability to weather the AI shift and begin capitalizing on it should quiet some of the loudest bear cases.
Technically, the stock now trades firmly above its 200-day moving average, a sign of renewed momentum. Wall Street seems to agree. Following the report, Guggenheim raised its price target from $190 to $210, while Stifel Nicolaus upped its target from $200 to $218 earlier in the week.
With strong earnings, rising analyst support, and a reaccelerating business across key segments, Alphabet’s comeback looks well underway, and investors are starting to take notice.
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