Stock of Alphabet, the tech giant, Speeding Up AI Development - Worth Buying Now?
In a recent earnings report, Alphabet, the parent company of Google, announced impressive growth across its major business segments, driven primarily by AI-driven growth and robust demand in cloud computing.
The Gemini app, Alphabet's flagship app, now boasts over 450 million monthly active users, a significant increase from previous quarters. AI is playing a crucial role in this growth, with AI Overviews driving over 10% more queries globally. The Gemini app's daily requests jumped over 50% sequentially, and AI Mode, currently only available in two countries, has already amassed over 100 million monthly active users.
Alphabet's cloud business, Google Cloud, demonstrated extraordinary growth, with Q2 2025 revenues increasing 32% year-over-year to $13.6 billion. The Google Cloud Platform (GCP) annual revenue run rate now exceeds $50 billion, a testament to strong customer demand for AI-powered cloud services. YouTube ad revenue also rose by 13% to $9.8 billion.
Alphabet's capital expenditure plans reflect its commitment to maintaining its lead in the competitive tech landscape. The company plans to spend $85 billion in capital expenditure (capex) this year, with anticipation of spending more in 2026 due to strong demand for Google Cloud products and services. These investments focus on expanding data centers and AI infrastructure.
Despite these substantial investments, Alphabet's earnings per share jumped 22% year over year to $2.31, and the company surpassed analyst consensus estimates, with EPS of $2.18 on revenue of $94 billion expected. Google Cloud segment operating income skyrocketed from $1.2 billion a year ago to $2.8 billion.
Alphabet's Waymo robotaxi business has expanded to Atlanta and is currently testing in 10 cities, including New York and Philadelphia. The company aims to launch the Waymo service in all 10 cities in the near future.
With the huge distribution edge provided by the Chrome browser and Android operating system, Alphabet is well positioned in a shifting AI-search landscape. The company's forward price/earnings-to-growth ratio (PEG) of 0.8 indicates that its stock is typically considered undervalued, while its forward price-to-earnings ratio (P/E) is around 19 times 2025 analyst estimates.
In conclusion, Alphabet's outlook for AI-driven growth and cloud demand is highly positive, supported by substantial capital investments to further reinforce its AI infrastructure and maintain its lead in the competitive tech landscape.
- Investing in Alphabet's stock market could provide significant returns, given its impressive growth in AI-driven businesses and cloud computing, as demonstrated by its increased profits and expanding user base.
- The finance sector should take note of Alphabet's robust performance in the field of data-and-cloud-computing technology, as it has driven a significant portion of the company's revenue growth, including its cloud business, Google Cloud.
- Money spent on Alphabet's capital expenditures, such as expanding data centers and AI infrastructure, indicates a strong commitment to maintaining its leadership position in the competitive tech landscape, particularly in the fast-growing AI sector.
- The Gemini app's AI-driven features, like AI Overviews, have contributed to a substantial increase in queries and active users, pointing towards a promising future for investing in tech companies that leverage advanced technology for user engagement.
