Alphabet Stock (GOOGL) Good Growth and Good Value in Q2 2025

Alphabet (NASDAQ:GOOGL), the parent company of Google, recently released its Q2 2025 quarterly report, showcasing double‑digit growth across key metrics. In a climate where technological leadership is under scrutiny, Alphabet’s results illustrate both strong operational expansion and attractive valuation. In this article we will dive into Alphabet recent earnings, stock performance & valuation, growth potential, and the risks investor should consider.

About Alphabet

Alphabet is an American multinational technology conglomerate created in 2015, via a corporate restructuring of Google, and headquartered at the Googleplex in Mountain View, California. Founded by Larry Page and Sergey Brin, Alphabet was formed to separate Google’s core advertising and search operations from its “Other Bets” ventures like Waymo, Verily, and X Development. Today, Alphabet is one of the largest and most profitable technology companies globally, with major business lines including Google Search, YouTube, Google Cloud, and various AI-driven products and platforms.

Alphabet Financial Performance

In Q2 2025, Alphabet delivered another strong quarterly performance, with revenue reaching $96.42 billion, up 13.79% compared to $84.74 billion in Q2 2024. Earnings per share (EPS) for the quarter came in at $2.31, reflecting a 22.29% increase from $1.89 a year earlier. On a trailing twelve-month (TTM) basis, revenue totaled $371.34 billion, a 13.13% rise from $328.28 billion, while EPS surged 34.7% to $9.39, up from $6.97 in the prior year. Free cash flow per share (TTM) also increased by 12.2%, reaching $5.42, compared to $4.83 in Q2 2024. Alphabet maintained strong profitability, with a gross profit margin of 58.94%, net profit margin of 31.12%, and a free cash flow margin of 17.97%. Return metrics remain robust, with a return on assets (ROA) of 16.79% and an impressive return on equity (ROE) of 34.83%. The company’s balance sheet is healthy, supported by a low debt-to-equity ratio of 0.11.

Over the past five years, Alphabet's revenue has been growing at a 17.1% CAGR, net income at 26.4%, and free cash flow at 10.4%. This shows that Alphabet has been a consistent performer in the past and is still projected to grow in the future.

Alphabet Fiscal 2025 Financial Forecast

Looking ahead, analysts forecast full-year 2025 revenue of $393.92 billion, representing a 12.54% increase from 2024, and EPS of $9.93, a projected 23.56% rise from $8.04. Analysts have assigned a strong buy rating, with a consensus price target of $215.47, implying an 11.54% upside, and a high-end target of $250, offering up to 29.38% potential gain from current levels.

GOOGL Stock Price Performance and Valuation

At the time this article was written, the stock was trading at $193.18. Alphabet stock has gained 15.48% over the past year, slightly underperforming the S&P 500, which rose 18.3% in the same period. However, over a longer horizon, Alphabet has delivered a remarkable 159.6% return over the past five years, significantly outpacing the S&P 500’s 95.1% gain. 

Despite this strong historical performance, Alphabet remains attractively valued. The stock now offers a modest dividend yield of 0.43%, providing an added incentive for long-term shareholders. The stock trades at a price-to-earnings (P/E) ratio of 20.48 on a trailing twelve-month basis and a forward P/E of 19.23, which are reasonable given the company’s consistent double-digit earnings growth. Its price-to-sales (P/S) ratio is 6.32 TTM, with a forward P/S of 5.9. The price-to-free-cash-flow (P/FCF) ratio stands at 35.04.

Based on Fiscal.ai data, if we look at the valuation over the past five years, the forward P/S is slightly above the average, the forward P/E is below the average, while the P/FCF is above the average. The forward P/E indicates a potential undervaluation of Alphabet stock, as its earnings are still projected to grow at a double-digit rate.

Alphabet Growth Potential

Alphabet growth potential remains robust, driven by several factors.

• AI-Driven Enhancements Across Core Products
  Alphabet’s deepening integration of artificial intelligence into Search, YouTube, and Cloud is unlocking new monetization streams and user engagement. In Q2 2025, AI-powered Search features such as AI Overviews reached over 2 billion monthly users, enriching query results with concise, context-aware summaries and driving incremental ad impressions. Meanwhile, generative AI capabilities in YouTube through AI Mode and Shorts monetization boost watch-hour revenue parity with traditional ad formats, expanding advertiser demand. 
• In Google Cloud, AI Infrastructure and Gemini-powered solutions accounted for a large share of the 32% YoY revenue surge to $13.6 billion, with AI-led backlog rising to $106 billion at quarter end, up 38% YoY. This full-stack AI approach not only differentiates Alphabet’s products but also creates high-margin upsell opportunities, cementing the company’s leadership at the frontier of AI-enabled services.
• Explosive Google Cloud Expansion
• Google Cloud’s 32% year-on-year revenue growth to $13.6 billion underscores its evolving role as a key growth engine. Beyond core infrastructure and platform fees, enterprise demand for AI and machine-learning workloads drove large-deal momentum, with multiple $1 billion-plus contracts signed in H1 2025 and an annualized revenue run-rate exceeding $50 billion. Profitability also improved sharply: operating income more than doubled to $2.8 billion, lifting Cloud’s operating margin from 11.3% to 20.7% in one year. 
• These gains reflect economies of scale in data-center deployment and optimized resource utilization, positioning Google Cloud to increasingly compete with AWS and Microsoft Azure. As more enterprises migrate AI workloads to GCP, this segment should sustain high-teens to low-30s growth, contributing materially to Alphabet’s overall top-line expansion.
• Strategic Capital Expenditure Fueling Next-Gen Infrastructure
• In Q2 2025, Alphabet invested $22.4 billion in capital expenditures, up 70% YoY to expand data centers, AI-optimized servers, and network capacity, bringing its full-year CapEx outlook to approximately $85 billion. This aggressive investment is aimed at meeting surging demand for generative AI and cloud services, with global token-processing volumes nearly doubling in early 2025. By owning and operating proprietary AI infrastructure, Alphabet achieves a cost and performance advantage over competitors reliant on third-party hardware. These long-lead deployments lay the groundwork for microservices, agentic AI, and edge-compute applications, enabling faster feature roll-outs and enhanced user experiences. While short-term cash-flow is impacted, these investments create a formidable moat, underpinning future revenue growth and margin expansion as AI workloads scale.

Risks to Consider

While Alphabet stock looks like a compelling opportunity, we should be mindful of potential risks.

• AI Competition and Search Market Disruption
  Competition from AI-driven platforms like ChatGPT and Perplexity is challenging Google's core search business. Google's traditional revenue from search ads relies on web links, whereas AI competitors provide direct answers, pressuring Google's business model and user engagement. Though Google is adapting by integrating AI summaries and conversational overviews, investors remain cautious about how these changes will affect growth.
• Dependence on Advertising Revenue
  Approximately 69% of Alphabet’s revenue comes from advertising, primarily through Google Search and YouTube. Economic downturns could reduce ad spending, as seen during the 2008 recession when online ad revenue dropped 2%. Additionally, increasing competition from Amazon, Meta, and others threatens Alphabet’s market share, potentially eroding margins as traffic acquisition costs (TAC) rise.
• Regulatory and Antitrust Pressure
  Alphabet faces intense scrutiny and legal challenges globally, particularly from U.S. and European regulators. The U.S. Department of Justice alleges monopolistic practices in search and online advertising, including antitrust lawsuits and potential forced divestitures such as the Chrome browser. In Europe, Alphabet faces multi-billion euro fines for Android-related practices. These legal risks could materially impact Alphabet’s operations and revenue models

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Conclusion

Alphabet’s Q2 2025 results reinforce its position as a fundamentally strong, fast-growing, and attractively valued tech giant. With double-digit revenue and earnings growth, high profit margins, a solid balance sheet, and promising AI and cloud-driven opportunities, the company offers both stability and future upside. Despite slight underperformance in the past year, its long-term track record and reasonable valuation make it a compelling buy. For investors seeking growth with value, Alphabet remains a smart long-term investment choice.