Is Alphabet a Buy Amid Q2 Beat, AI Visibility and Attractive Valuation?
Alphabet is significantly emphasizing its Ai-capabilities to boost its search engine advertising business and cloud computing business. Alphabet raised its 2025 capital expenditure target to $85 billion from the $75 billion projected earlier.
CEO Sundar Pichai said. 'Our AI infrastructure investments are crucial to meeting the growth in demand from cloud customers.' Pichai also said, 'We are seeing significant demand for our comprehensive AI product portfolio.' CFO Anat Ashkenazi said capital expenditures will rise yet again next year.
Solid Earnings Estimate Revisions for GOOGL Stock
For 2025, the Zacks Consensus Estimate currently shows revenues of $333.75 billion, suggesting an improvement of 13.1% year over year and earnings per share of $9.89, indicating an increase of 23% year over year. The Zacks Consensus Estimate for the current year has improved 3.6% in the last seven days.
For 2026, the Zacks Consensus Estimate currently shows revenues of $373.75 billion, suggesting an improvement of 12% year over year and earnings per share of $10.56, indicating an increase of 6.7% year over year. The Zacks Consensus Estimate for next year has improved 4% in the last seven days.
GOOGL currently has a long-term (3-5 years) EPS growth rate of 14.9%, well above the S&P 500's long-term EPS growth rate of 12.6%.
Extensive AI Infusion for Search Engine
Alphabet is relying heavily on AI to maintain its search engine dominance. GOOGL is facing stiff competition from Microsoft Corp. MSFT and Baidu Inc. BIDU. Despite competition, GOOGL is currently accounting for nearly 90% global market share followed by almost 4% of Microsoft's Bing.
In the last reported quarter, Google Search and other revenues increased 11.7% year over year to $54.19 billion, surpassing the Zacks Consensus Estimate by 3.04%. Overall queries and commercial queries on Search continued to grow year over year in the reported quarter.
Alphabet is advancing visual and contextual search capabilities. The Circle to Search feature is now active on more than 300 million devices. GOOGL is adding functionalities to help people explore complex topics and ask follow-up questions without switching apps.
AI Overviews now reach more than 2 billion users per month and are available in over 200 countries across 40 languages. GOOGL is now driving over 10% more queries globally. Powered by Gemini 2.5, AI Overviews currently delivers the fastest AI responses in the industry. The combination of lens or Circle to Search, together with AI Overviews, is driving multimodal search usage.
Google's AI-powered Search features are driving deeper engagement, with AI Mode offering advanced reasoning and multimodal responses. Users are generating queries twice as long as those in traditional searches. The launch of AI Mode in the United States and India — where it currently has more than 100 million monthly active users — is expected to drive further growth.
AI-Powered Cloud Computing Business
Google Cloud has solidified its position as the third-largest provider in the highly competitive cloud infrastructure market against Amazon.com Inc. 's AMZN cloud arm, Amazon Web Services, and Microsoft's Azure.
GOOGL is cashing in on the increasing demand for Large Language Models with its most powerful AI model called Gemini. Google Bard and Search Generative Experience are powered by Gemini Pro to deliver an enhanced user experience. Google Cloud offers Duet AI, which provides pre-packaged AI agents that assist developers in writing, testing, documenting and operating software.
GOOGL launched Gemma 3, a collection of lightweight, state-of-the-art open models that can run on a single GPU or Tensor Processing Unit (TPU). At its Cloud Next 2025 conference in Las Vegas, Alphabet unveiled Ironwood, its seventh-generation TPU, expected to be available later this year.
Google Cloud unveiled its Cloud Wide Area Network, giving enterprises access to its private global fiber network. Alphabet also showcased Willow, its new quantum chip while on the AI model front, Alphabet launched Gemini 2.5, its most advanced reasoning model, alongside Gemini 2.5 Flash, a low-latency, cost-efficient version tailored for developers.
Product Diversification
Alphabet's self-driving business — Waymo — has recently gathered significant pace. GOOGL is scaling up this business, providing around 250,000 rides per week at present. Alphabet is also looking for opportunities to introduce this service to several new cities.
As per Pichai, 'The team is testing across more than 10 cities this year, including New York and Philadelphia. We hope to serve riders in all 10 in the future.' Waymo is using GOOGL's cloud computing, AI infrastructure and mapping data to serve customers.
Lucrative Valuation of GOOGL Shares
Alphabet currently carries a forward P/E of 19.52X for the current financial year, compared with 20.42X of the industry and 19.96X of the S&P 500. GOOGL has a return on equity of 34.31% compared with 4.01% of the industry and 16.88% of the S&P 500 Index.
Investment Thesis for GOOGL Shares
Year to date, shares of Alphabet lagged the broad-market index — the S&P 500. However, the stock received huge momentum in the past three months, in which it jumped more than 20% compared with around 16% gain of the S&P 500. In the past month, GOOGL advanced 9.8%, while the S&P 500 rose 3.2%.
Alphabet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
At this stage, it will be prudent to buy GOOGL on every dip. Hold this stock for the long term as the company's extensive AI thrust and robust future projections will generate more value.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They include
Stock #1: A Disruptive Force with Notable Growth and Resilience
Stock #2: Bullish Signs Signaling to Buy the Dip
Stock #3: One of the Most Compelling Investments in the Market
Stock #4: Leader In a Red-Hot Industry Poised for Growth
Stock #5: Modern Omni-Channel Platform Coiled to Spring
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.
Download Atomic Opportunity: Nuclear Energy's Comeback free today.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
Baidu, Inc. (BIDU): Free Stock Analysis Report
Alphabet Inc. (GOOGL): Free Stock Analysis Report
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
CTV News
an hour ago
- CTV News
Boeing workers who build fighter jets plan to go on strike
The Boeing logo is displayed at the company's factory, Sept. 24, 2024, in Renton, Wash. (AP Photo/Lindsey Wasson, File) NEW YORK — Boeing workers who build fighter jets are planning to go on strike Monday at midnight. About 3,200 workers at Boeing facilities in St. Louis; St. Charles, Missouri; and Mascoutah, Illinois, voted to reject a modified four-year labor agreement with Boeing, the International Association of Machinists and Aerospace Workers union said Sunday. 'IAM District 837 members build the aircraft and defense systems that keep our country safe,' said Sam Cicinelli, Midwest territory general vice president for the union, in a statement. 'They deserve nothing less than a contract that keeps their families secure and recognizes their unmatched expertise.' The vote followed members' rejection last week of an earlier proposal from the troubled aerospace giant, which had included a 20% wage increase over four years. At the time, union leaders had recommended approving the offer, calling it a 'landmark agreement' and saying the offer would improve medical, pension and overtime benefits. Then there was a cooling-off period of a week, followed by the union members rejecting Boeing's latest proposal. 'We're disappointed our employees rejected an offer that featured 40% average wage growth and resolved their primary issue on alternative work schedules,' said Dan Gillian, Boeing Air Dominance vice president and general manager, and senior St. Louis site executive. 'We are prepared for a strike and have fully implemented our contingency plan to ensure our non-striking workforce can continue supporting our customers.' Boeing has been struggling after two of its Boeing 737 Max airplanes crashed, one in Indonesia in 2018 and the other in Ethiopia in 2019, killing 346 people. In June, one of Boeing's Dreamliner planes, operated by Air India, crashed, killing at least 260 people. On Tuesday, Boeing had reported that its second-quarter revenue had improved and losses had narrowed. The company lost US$611 million in the second quarter, compared to a loss of $1.44 billion during the same period last year. Cathy Bussewitz, The Associated Press
Globe and Mail
3 hours ago
- Globe and Mail
Better Artificial Intelligence Stock: BigBear.ai vs. Nvidia
Key Points has become an AI investor darling over the past few years. Nvidia is the leading artificial intelligence semiconductor company. There's no substitute for high revenue growth and profitability -- and Nvidia has both. 10 stocks we like better than Nvidia › Many investors are focused on artificial intelligence stocks these days, which can be a smart play as AI transforms many industries. But it's starting to seem like any AI stock is a winner in the market right now, which means some investors may not be doing their due diligence when evaluating companies. With that in mind, two AI companies with surging share prices right now are Nvidia (NASDAQ: NVDA) and (NYSE: BBAI), and it may be worth taking a closer look at both to see which one looks like the better AI stock to buy right now. What's happening with Nvidia Nvidia gets top billing in this matchup because the company has experienced monster growth over the past few years as companies clamor for its artificial intelligence semiconductors. An estimated 70% to 95% of data centers utilize Nvidia's AI processors, and there seems to be no slowing down for the company's growth. For example, Nvidia's total sales soared 114% in fiscal 2025 to $130.5 billion, and its earnings skyrocketed 147% to $2.94 per share. This growth has been fueled by the company's data center segment, which experienced a 142% revenue surge to $115 billion last year. The impressive earnings and revenue growth have resulted in Nvidia's stock surging 57% over the past year. That's pushed the company's valuation higher, and Nvidia's shares currently have a price-to-earnings multiple of about 56. That's not cheap, but it's still lower than the average P/E ratio of 64 in the semiconductor industry right now. What's more, Nvidia could continue to benefit from AI investments for many more years to come. Nvidia CEO Jensen Huang believes AI will fuel $2 trillion in data center spending over the next several years. While Nvidia's growth isn't guaranteed, many tech giants have already committed to spending hundreds of billions of dollars to expand their AI data centers over the next few years. That's creating an ongoing opportunity for Nvidia to continue increasing its sales. What's happening with is an AI data analytics company that helps companies and the U.S. government sort through their data to make decisions. AI analytics is a burgeoning AI trend, and it has propelled the stock of similar companies, like Palantir, into the stratosphere. stock, for its part, has jumped 323% over the past year. But despite its impressive gains, there are some significant concerns I have with including its lack of strong revenue growth. sales increased just 5% in Q1 to $34.8 million, and management's outlook for the full year is for $160 million to $180 million -- an increase of just 7.5% at the midpoint. These are fairly unimpressive sales figures for a small AI company that's trying to tap into an expanding artificial intelligence analytics market. One of the company's problems is that 52% of its revenue comes from just four customers. That's a high concentration of sales from just a handful of customers, and it means that if one or two leave, could be in trouble. And then there's the company's lack of earnings. reported a loss of $1.10 per share last year and continued that trend with a loss of $0.25 per share in Q1. While many small start-ups often aren't profitable, it's problematic that the company's lack of earnings comes in addition to unimpressive sales growth. Meanwhile, stock has a price-to-sales ratio of 11, which is substantially higher than the average P/S multiple of 3 for the S&P 500 and means that investors are paying a premium for it right now. Verdict: Nvidia is the hands-down winner Nvidia's stock isn't cheap, and there are always risks with investing in AI stocks that have already experienced astronomical growth. But the company is a hands-down better investment than because it's massively profitable, continually expanding its revenue, and outpaces its rivals in the AI semiconductor market. Meanwhile, stock is overvalued, its revenue growth is unimpressive, and the company isn't profitable. This makes Nvidia the no-brainer in this matchup and one of the best AI stocks to buy and hold for the long term. Should you invest $1,000 in Nvidia right now? Before you buy stock in Nvidia, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025
Globe and Mail
4 hours ago
- Globe and Mail
Amazon's Earnings: What Comes Next and How to Play It
Shares of tech giant Inc. (NASDAQ: AMZN) finished Thursday's session up nearly 2%, only to tumble more than 6% in after-hours trading following the company's Q2 earnings release. This sharp reversal underlines just how high expectations had gotten after the 40% rally from April's low. The stock's multi-month move meant anything less than a near-perfect report risked triggering a wave of profit-taking, and that appears to be exactly what's happening already. As we'll see below, however, this is also creating a couple of interesting plays for investors to consider depending on their belief in Amazon's potential over the long run, and their near-term appetite for risk. Let's jump in and take a look. The Report Looked Good, But It Had to Be Great At first glance, Amazon seemed to deliver. The company's earnings per share came in more than 25% above expectations, while revenue was up 13.3% year-over-year. Both metrics landed hot and were well above analyst expectations, adding to Amazon's impressive track record of delivering strong headline numbers quarter on quarter. But investors weren't satisfied based on the after-hours price action. As anticipated earlier in the week, any sign of weakness in last night's report could send the bulls running and the bears raging. And Amazon's weaker-than-expected guidance for operating income and some free cash flow concerns seem to have done just that. The range shared by management on the former was notably conservative, while the latter figure is now at its lowest in two years. In that context, it's perhaps not all that hard to see what investor sentiment would swing from risk-on to risk-off so quickly. It remains to be seen how long this switch will last, but in our view, there's little to be worried about regarding Amazon's long-term potential. What the Market Might Be Missing While the overnight sell-off might feel sharp, it's also arguably overdone. This was still an impressive report for Amazon, with revenue growth accelerating across the board and profitability improving at the same time. Overall growth remains strong despite ongoing infrastructure investments and competitive pricing pressures. The bears will point to growing concerns around the company's ability to stay in the lead group of the artificial intelligence (AI) arms race, but CEO Andy Jassy was not overly concerned. He spoke about this on the post-earnings conference call, saying, "I don't believe that we will have fully resolved the capacity we need for the amount of demand that we have in a couple of quarters. I think it will take several quarters, but I do expect that it's going to get better each quarter". Taken in total, there's a strong case to be made that Amazon is still in the early innings of its next growth phase, and Thursday's after-hours drop is more about positioning than fundamentals. 2 Ways to Play It For those of us on the sidelines, what kind of plays should we be looking for? Option one might be to sit back and let the correction play out. A move down to around the $220 level would take the stock back to a key area of support, and, given how one-directional the recent rally has been, would actually be quite healthy. If that $220 level were to hold, and or if we were to see a fresh bullish crossover in the MACD, it would likely mark the start of the next leg higher. Waiting for confirmation here gives you better risk/reward and protects against a deeper pullback. The other option is to start accumulating right away. This argument rests on the idea that Amazon's core thesis remains intact and the bears' concerns are already, or at least close to being, priced in after last night's drop. For big-time believers and long-term investors, this dip could be a gift - especially considering the company's strength across multiple verticals and its growing strength in high-margin, AI-driven businesses. Remember, multiple firms have been reiterating their Buy and Overweight ratings all through 2025, and even as recently as this week. The most recent price target from the team over at UBS Group sees the stock trading north of $270, a move that points to additional upside of around 15% from current levels. Don't expect their bullishness, and that of their peers, to change anytime soon. Before you make your next trade, you'll want to hear this. MarketBeat keeps track of Wall Street's top-rated and best performing research analysts and the stocks they recommend to their clients on a daily basis. Our team has identified the five stocks that top analysts are quietly whispering to their clients to buy now before the broader market catches on... and none of the big name stocks were on the list. They believe these five stocks are the five best companies for investors to buy now...
