Alphabet Inc. (GOOGL) has caught a strong bid, climbing ~15% over the past five days, sending its stock to new all-time highs at $240. Recent gains have been driven by a solid Q2 report and a ruling by District Court Judge Amit Mehta in favor of Google, which allows the company to avoid a potential breakup of its business units.
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Despite the stock reaching for the rights, its flagship Gemini product still lacks market presence and remains under the radar in terms of revenue maximization. Considering all factors, GOOGL stock may be poised for further upside, supported by Gemini’s own commercial trend.
I am Bullish on Google as I believe the recent quarter marks the beginning of a new, AI-driven growth cycle for the tech giant, not a peak in earnings growth.
Gemini Fuels Profitable Growth
A key reason behind my bullish stance on Google is the profitable growth fueled by AI investments. In Q2, Google Cloud revenue increased 32% YoY to $13.6 billion, but what was even more impressive was the expansion in Google Cloud operating income margin from 11.3% a year ago to 20.7% in Q2.
Despite an increase in usage costs for technical infrastructure and employee compensation, overall segment operating costs increased at a much slower pace compared to Cloud revenue, suggesting that the company is enjoying significant operating leverage. This is an early sign that Google is shifting from high investment into profitability.
Based on these observations, I believe Google Cloud’s contribution to the company’s net profit will increase gradually, paving the way for a notable increase in overall operating margins. In Q2, Google Cloud’s absolute YoY revenue growth of $3.3 billion accounted for approximately 28% of total revenue growth reported by the company.
However, this segment’s operating income growth of $1.7 billion accounted for more than 42% of the company’s total operating income growth, highlighting that the cloud segment is significantly more profitable than other business segments.
Gemini is Exhibiting Early Signs of Competitive Advantages
In addition to how Gemini is already fueling profitable growth, I am impressed by how Gemini has gained traction among consumers in recent years, despite ChatGPT enjoying first-mover advantages in this space.
According to Similarweb data, by the end of May 2025, Gemini had reached six million app installs per week on Android devices compared to less than three million for ChatGPT. Until April, however, ChatGPT dominated app installs on Android devices, which suggests that Google’s massive reach as a search engine is also fueling Gemini app downloads.
Interestingly, according to the results of some recent studies, Gemini has surpassed ChatGPT for specific reasoning tasks. For example, in standardized benchmarks for reasoning such as MMLU and GSM8K, Gemini 2.0 Pro achieved a 92.4% accuracy compared to 88.7% for ChatGPT. From a consumer perspective, Gemini also offers a much larger context window compared to ChatGPT (1 million tokens vs. 128,000 tokens), which appears to have attracted many ChatGPT users to test Gemini in recent times.
Aggressive AI Investments are Justifiable
Another driver of my bullish outlook on Google is the conviction that its aggressive AI investments are well justified. Recent SEC filings reveal a sharp climb in capital expenditures that has unsettled some investors. CapEx rose from $14.3 billion in Q4 2024 to $17.2 billion in Q1 2025, then surged to $22.4 billion in Q2—a 70% year-over-year increase.
At the same time, assets not yet in service jumped from about $51 billion at the end of 2024 to nearly $62 billion by Q2 2025, reflecting heavy spending on data centers, servers, network equipment, and real estate.
Providing context, CEO Sundar Pichai announced in July that Google plans to invest $85 billion in CapEx this year—well above prior expectations—citing soaring AI demand from both consumers and enterprises. With most of this spending directed toward foundational infrastructure, Google is clearly aiming to own the full AI technology stack over the long term, which could unlock higher operating margins. These investments also position the company to better serve the accelerating enterprise appetite for AI and cloud solutions.
Is Google a Buy, Hold, or Sell?
On Wall Street, GOOGL stock carries a Strong Buy consensus rating based on 28 Buy, nine Hold, and zero Sell ratings over the past three months. GOOGL’s average stock price target of $233.39 implies approximately 2.5% downside potential over the next twelve months.
Google’s recent rally has brought the stock into what analysts broadly view as “fair value,” but I expect positive price target revisions once the company begins showing tangible returns from its heavy AI investments.
At the Goldman Sachs (GS) Communacopia + Technology Conference, Google Cloud CEO Thomas Kurian highlighted that remaining performance obligations now total $106 billion and are growing faster than revenue—clear evidence of robust demand as enterprise customers increasingly adopt cloud and AI solutions. This points to stronger-than-expected revenue growth in the quarters ahead.
From a valuation standpoint, Google still trades at a discount to its key AI rival, Microsoft (MSFT). Its forward P/E of 24 compares to Microsoft’s 32, and across other measures—such as price-to-sales and EV/EBITDA—Microsoft commands a notable premium. While that premium reflects Microsoft’s early-mover advantage in generative AI via its OpenAI partnership, the valuation gap between the two has narrowed meaningfully, suggesting Google is due for a re-rating.
Google’s AI Gains and Legal Win Set Stage for Profitable Growth
Google’s AI investments are beginning to pay off, with Gemini rapidly narrowing the gap with ChatGPT across multiple performance benchmarks and in user adoption. Yet these gains still appear underappreciated by the market, as reflected in the persistent valuation gap between Google and Microsoft.
Over the long term, Google’s sustained AI spending positions it to drive profitable growth and potentially unlock much higher share prices. Adding to the bullish case, the recent District Court ruling reduces the risk of a breakup, allowing Google to fully capitalize on the benefits of its AI strategy as an integrated business.