Earnings season is in full swing, and the numbers are coming in strong. Roughly 83% of S&P 500 companies that have reported so far have topped estimates – a pace we haven’t seen since Q2 of 2021. That strong showing has fueled bullish sentiment, pushing the S&P 500 to 10 record closes in the past 19 trading sessions.
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But not all ‘Magnificent 7’ stocks are riding the same wave. Tesla (NASDAQ:TSLA) and Alphabet (NASDAQ:GOOGL), two of the group’s biggest names, delivered very different earnings stories this season – and that contrast has caught the attention of Bank of America.
BofA’s analysts took a close look at both companies following their latest reports and issued a clear verdict on which one stands out as the better buy right now. Using TipRanks database, we’ve compared the Wall Street consensus on each to see how the outlooks stack up. Let’s dive in.
Tesla
Few companies command attention quite like Tesla, a brand that’s become synonymous with innovation, ambition, and controversy in equal measure. But beneath the headlines and hype, the company has been navigating an increasingly complicated landscape – one shaped by shifting politics and market pressures.
Yet, even amid these challenges, Tesla continues to lean into its innovation-led identity. Musk has positioned the company at the forefront of real-world AI applications, particularly in autonomous driving and humanoid robotics through the Optimus program. While these ventures aren’t yet driving profits, they underscore Tesla’s ambitions for the future of mobility and automation.
Those ambitions are already gaining traction. In its second quarter report, Tesla highlighted the successful rollout of its Robotaxi service in Austin, Texas, a pilot program that has quickly expanded. The company is now pursuing regulatory clearance to replicate this model across multiple states, including Arizona, Florida, and Nevada. Musk’s aim is to bring the Robotaxi service to half the U.S. population by year-end, pending approval.
Meanwhile, however, Tesla’s bread-and-butter automotive segment showed signs of strain, posting $16.66 billion in revenue in Q2, a 16% decline from the year-ago quarter. Overall, total revenue came in at $22.5 billion, down 12% year-over-year but still $408 million above expectations. Non-GAAP EPS landed at 40 cents, matching forecasts, though down 23% from the prior-year period.
Covering TSLA stock for Bank of America, analyst Federico Merendi takes particular note of the company’s work with AI while also acknowledging its headwinds.
“Tesla commentary on future developments in terms of real-world AI (Autonomous vehicles/robotaxi and Optimus) remains bullish. However, the company is facing challenging times. CEO Elon Musk indicated that Tesla ‘probably could have a few rough quarters’ because of the policy changes in the US (mainly around the phase out of IRA incentives). Commentary also suggests that the tariff impact may increase in the future. However, by end of 2026, management thinks that Tesla’s economics will be compelling with autonomy at scale… Despite the challenges ahead, we see TSLA as the company with the largest advantage in terms of autonomous driving initiatives and physical AI applications currently in the marketplace,” Merendi opined.
Even though Merendi sees underlying strengths in Tesla, he rates the stock as Neutral (i.e., Hold), with a $341 price target that points toward a one-year upside potential of ~8%. (To watch Merendi’s track record, click here)
That stance mirrors the broader sentiment on Wall Street, where the consensus rating is also a Hold, based on 35 recent reviews that break down into 14 Buys, 14 Holds, and 7 Sells. With TSLA currently trading at $316.06, the $314.14 average price target suggests shares will stay range-bound for the foreseeable future. (See TSLA stock forecast)
Alphabet
Next up is Alphabet, best known as the parent company of Google. Through Google and its other major subsidiary, YouTube, Alphabet maintains a dominant position in online search and video content. These platforms serve as pillars of its digital advertising business, which remains the company’s primary revenue engine.
Like several of its Magnificent Seven peers, Alphabet is making significant strides in applied AI. It already holds a strong position in cloud computing through Google Cloud, and it’s expanding that subscription-based platform with AI-powered tools. At the same time, the company is weaving AI capabilities throughout its core products. Google Search now includes a generative AI “overview” – a summary placed above standard results – designed to enhance how queries are interpreted and answered with natural language.
That innovation hasn’t come without controversy. Alphabet is facing early legal scrutiny over its AI overview feature. A notable example is a lawsuit filed by Chegg, which alleges that Google’s new search format siphons user traffic away from traditional links, impacting smaller businesses that rely heavily on search visibility. In the UK, a coalition of publishers has filed a similar complaint. While these cases remain limited for now, they reflect growing concern over how generative AI could reshape the web’s traffic and revenue models.
Meanwhile, Alphabet is contending with broader regulatory challenges. The company is currently appealing a 2024 decision in the DOJ’s landmark antitrust case targeting Google Search, which was decided in federal court in Washington, D.C. A separate antitrust ruling – focused on Google’s digital advertising practices – was issued in early 2025 by a court in Virginia, with the Department of Justice prevailing in both cases. Remedies in both matters are still being determined, and final outcomes are expected later this year or in 2026.
Despite these legal overhangs, Alphabet’s business momentum remains strong. The company reported $96.4 billion in revenue for the second quarter of 2025, a 14% increase from the prior year and $2.4 billion above consensus estimates. Earnings per share came in at $2.31, up 22% year-over-year and ahead of expectations by 12 cents.
Much of that strength was driven by Google Cloud, which continues to serve as a major growth engine. The segment delivered $13.6 billion in revenue – marking a 32% annual increase – thanks to rising demand for AI infrastructure and generative AI solutions. Together, these results underscore just how central AI has become to Alphabet’s strategy.
AI is central to Bank of America analyst Justin Post’s outlook on GOOGL shares. He believes the company’s strength in AI will provide a key source of support, even as it navigates ongoing legal woes.
“Another stable qtr for Search results increases our confidence in the AI transition and should ease concerns on a potential revenue reset. We acknowledge growing users of OpenAI but think Street could be underappreciating potential AI driven upside for Search (more use, better ads) & Cloud. At ~$195, stock valued at 19x our ’26 EPS, with the core business at just 12x in our SOTP (vs S&P at 21.5x). Upcoming DoJ case remedy ruling (expected in Aug) remains an overhang but could also be a clearing event,” Post explained.
Quantifying this stance, Post gives GOOGL shares a Buy rating, along with a $217 price target that suggests a 12% potential gain over the next 12 months. (To watch Post’s track record, click here)
The Street as a whole gives GOOGL shares a Strong Buy consensus rating, based on 37 recent analyst reviews, which break down to 28 Buys and 9 Holds. The average price target of $215.11 is slightly below Post’s and indicates room for a one-year gain of 11%. (See GOOGL stock forecast)
While both Mag 7 stocks have underlying strengths, disparate earnings results can affect the analysts’ outlooks, and we see here that Bank of America is recommending Alphabet over Tesla as the one to buy after the Q2 earnings releases.
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.