The second-quarter earnings season of 2025 has arrived, and all eyes are on the tech titans that have long powered market returns. Among them, Alphabet Inc. (NASDAQ: GOOGL)—better known as Google—remains a bellwether of not just the technology sector but of the global economy’s digital transformation at large. With shares currently trading near $185, up nearly 15% year-to-date and sitting close to all-time highs, investors face a critical question: does Google still represent a compelling buy at this level, or has much of the upside already been priced in?
Alphabet’s Q2 results offer a nuanced picture of strength in core businesses, progress in artificial intelligence (AI) monetization, and persistent risks. This article takes a deep dive into Google’s earnings, its long-term strategic positioning, valuation, and the risk/reward trade-off investors face at today’s price.
A Solid Q2 Report Underscores Resilience
Alphabet reported Q2 2025 earnings that largely met Wall Street expectations, if not exceeded them modestly. Total revenues came in at $84.9 billion, up approximately 9.7% year-over-year, driven by continued growth in advertising, cloud services, and YouTube. Operating income grew at a slower but still respectable 8.3%, reflecting ongoing investments in AI infrastructure and talent.
The company posted earnings per share (EPS) of $2.52, a 12% increase from a year ago, slightly ahead of the consensus estimate of $2.49. Free cash flow surged to $21.7 billion, with a free cash flow margin approaching 26%. Alphabet also announced another $15 billion in stock buybacks, continuing its long-standing policy of returning capital to shareholders.
Advertising: Core Business Still Thriving
Advertising remains Google’s cash cow, accounting for nearly 78% of total revenues. Q2 saw advertising revenues grow 8% year-over-year, despite a somewhat cautious spending environment among certain sectors such as retail and travel. Notably, YouTube ad revenues jumped 11%, as the platform continued to capture engagement from younger demographics and benefited from improved ad-targeting algorithms.
Search advertising also showed resilience, growing 7%, driven by strength in high-value verticals like finance, healthcare, and B2B services. This suggests that despite the increasing prevalence of AI-based search competitors and regulatory scrutiny, Google Search maintains a formidable moat.
Cloud Gains Steam, AI at the Forefront
Perhaps the most exciting development for Alphabet is its progress in Google Cloud and its related AI offerings. Cloud revenues grew by a robust 22% year-over-year, climbing to $11.9 billion for the quarter. Operating margins in the cloud division improved as well, rising from 6% to 9% as scale efficiencies kick in.
AI monetization is gradually materializing, particularly through enterprise cloud contracts that bundle advanced AI services. Google announced new partnerships with Fortune 500 clients to deploy Gemini, its next-generation AI platform, in areas ranging from customer service chatbots to supply chain optimization.
While still a distant third behind Microsoft Azure and Amazon AWS in cloud market share, Google Cloud’s differentiated strength in open-source tools, data analytics, and AI integration positions it as a credible challenger. Continued double-digit growth in this segment is critical to Alphabet’s future.
Expenses, Margins, and Shareholder Returns
Alphabet’s spending discipline remains commendable. Total operating expenses rose 8% in Q2, in line with revenue growth, keeping operating margins steady around 27%. Capital expenditures came in at $11 billion, reflecting aggressive investment in AI-capable data centers and servers.
Alphabet ended the quarter with $119 billion in cash and marketable securities, and no net debt. The company’s massive cash war chest enables it to sustain buybacks, invest heavily in R&D, and withstand cyclical downturns.
However, critics point to the fact that share repurchases—though supportive of EPS—mask slower underlying per-share growth. While buybacks are value accretive in moderation, Alphabet’s willingness to repurchase stock aggressively even at elevated valuations could dampen returns if earnings growth fails to accelerate.
Valuation: A Premium Price for a Premium Business
At $185 per share, Alphabet’s market capitalization is now approaching $2.4 trillion. Based on consensus 2025 EPS estimates of roughly $10.20, the stock trades at about 18x forward earnings. On a price-to-free-cash-flow basis, Alphabet trades at approximately 23x.
These multiples represent a modest premium to the broader S&P 500 but remain attractive compared to peers like Microsoft (~29x) and Amazon (~42x). Investors are effectively paying up for Alphabet’s dominant competitive position, best-in-class cash generation, and optionality in emerging technologies like AI and autonomous vehicles.
Historically, Alphabet has delivered mid-teens annualized earnings growth, which makes an 18–20x multiple defensible if not outright attractive for long-term investors. That said, as the law of large numbers inevitably slows growth, Alphabet may struggle to sustain its historical growth rates—suggesting today’s price reflects much, though not all, of the upside.
Competitive and Regulatory Headwinds
Investors should not overlook the risks. Alphabet faces mounting regulatory pressures, particularly in the European Union and United States, over antitrust concerns. Forced divestitures or tighter restrictions on its advertising practices could materially impact profits in the future.
Competition from AI-first search engines, such as Microsoft’s Bing integrated with OpenAI, could erode Google’s dominance in search if user preferences shift meaningfully. Although evidence to date shows limited real-world impact, it remains a threat worth monitoring.
Cloud competition is fierce as well. While Google Cloud is growing rapidly, it trails Azure and AWS by a wide margin, and price wars or a slowdown in enterprise IT spending could hurt margins.
Finally, the capital intensity of building out AI infrastructure is increasing. While Alphabet can certainly afford it, the payoff on these investments remains uncertain and will take time to materialize in earnings.
Intrinsic Value and Entry Point
To assess whether Google is still a buy at $185, it’s useful to consider its intrinsic value. A discounted cash flow (DCF) model, assuming:
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10–12% annual free cash flow growth over the next five years,
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a long-term terminal growth rate of 3%,
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and a discount rate of 8%,
yields an estimated fair value range of $195–210 per share. This suggests the stock remains marginally undervalued, with 5–15% upside from current levels, though the margin of safety is admittedly thin.
An ideal entry point would be in the $165–170 range, providing a wider buffer against execution and macroeconomic risks. Nonetheless, for long-term investors with a multi-year horizon, initiating or adding to a position at current prices remains reasonable.
Final Verdict: Buy, Hold, or Sell?
Given Alphabet’s dominant competitive position, exceptional cash flow, and prudent capital allocation, the stock remains a core holding for long-term investors. While the valuation is no longer the bargain it was two years ago, Alphabet continues to offer steady compounding potential and reasonable downside protection, particularly in an increasingly AI-driven economy.
Verdict: Hold to moderately Buy.
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Existing shareholders should feel comfortable holding their shares.
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New investors can consider starting a position gradually, with an eye toward adding more aggressively on dips below $170.
Key Takeaways
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Alphabet delivered a solid Q2 2025, with revenue and EPS growth, strong cash generation, and improving cloud margins.
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Advertising remains resilient, while cloud and AI-driven services offer long-term growth potential.
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Valuation at $185 per share is slightly below intrinsic value but leaves only a modest margin of safety.
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Regulatory and competitive risks remain, though mitigated by Alphabet’s scale and innovation.
In sum, Google remains one of the highest-quality businesses in the world, and even at close to all-time highs, it still deserves a place in a diversified, long-term portfolio. For investors seeking durable growth and capital preservation, Alphabet continues to justify its premium.
Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.
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