Option Witch | GOOGL Earnings on Deck: Positioning with Vertical Spreads Amid Cloud Growth & DOJ Risk

$Alphabet(GOOGL)$ is scheduled to report results for the first quarter of 2025 after market close on Thursday, April 24, 2025. Alphabet's Q1 revenue is expected to be $75.434 billion, adjusted net income will be $24.783 billion, and adjusted EPS is expected to be $2.032, according to Bloomberg's consistent expectations.

Alphabet’s upcoming earnings report is expected to drive significant volatility, given the stock’s 20% YTD decline, regulatory and legal risks, and google cloud growth. Let’s dive into the potential sscenarios and related options strategies with $Alphabet(GOOGL)$ stock.

Regulatory and Legal Risks

Alphabet's Google needs strong measures imposed on it to prevent it from using its artificial intelligence products to extend its dominance in online search, a U.S. Department of Justice attorney said as a trial in the historic antitrust case began on Monday.

The outcome of the case could fundamentally reshape the internet by unseating Google as the go-to portal for information online.

The Justice Department is seeking an order that would require Google to sell its Chrome browser and take other measures to end what a judge found was its monopoly in online search. Prosecutors have compared the lawsuit to past cases that resulted in the break up of AT&T and Standard Oil.

Antitrust enforcers have proposed far-reaching measures designed to quickly open the search market and give new competitors a leg up.

Their proposals include ending Google's exclusive agreements with tablet and smartphone makers like Apple to make Google the default search engine on their devices.

Google would also have to license search results to competitors, among other requirements. The DOJ has proposed that, if other remedies fail to restore competition, Google would be forced to sell its Android mobile operating system.

Option Strategy: Bear Put Spread

Structure:

• Buy May 2, 2025 $155 Put (Mid-price: $7.92)

• Sell May 2, 2025 $150 Put (Mid-price: $5.05)

  $GOOGL Vertical 250502 150.0P/155.0P$

• Net Debit: $2.87 per contract

Profit/Risk Profile :

• Max Profit: $2.55 per spread

• Max Loss: -$245

• Breakeven: $152.55

Souce: Tiger Trade App

Google Cloud Growth Seen Around 29%, Driven by Acceleration in AI-Driven Workloads

Investors have been closely monitoring the trend of the Cloud business. Cloud segment growth may accelerate sequentially through traction with Gemini 2.5 and AI workload contribution. Consensus is estimating Q1 Cloud revenue of $12.3 billion, up 28.6% year-on-year. For Q1, estimates for operating profit margin range from 10% to 19% for the Google Cloud business.

This division is poised to benefit significantly from the increasing demand for cloud computing services, particularly as AI models become more resource-intensive. Analysts predict that if Google Cloud can reach $100 billion in annual revenue with a profit margin of 25%, it could contribute $25 billion to Alphabet's operating income—an essential growth driver for the company.

Option Strategy: Bull Call Spread

Structure:

• Buy May 2, 2025 $150 Call (Mid-price: $6.85)

• Sell May 2, 2025 $155 Call (Mid-price: $4.25)

  $GOOGL Vertical 250502 150.0C/155.0C$

• Net Debit: $2.60 per contract

Objective: Profit from a moderate upside move in GOOGL post-earnings while limiting upfront costs.

Profit/Risk Profile :

• Max Profit: $2.425 per spread ($5.00 width - $2.575 debit).

• Breakeven: $152.58 (current price: $151.47).

• Max Loss: Limited to $2.575 per spread.

  Souce: Tiger Trade App