As tech giant Alphabet (GOOGL) prepares to release its second-quarter results on Wednesday, investors will be focusing on two key areas: its big spending on AI data centers and the performance of its search business, which is finally facing real competition. Analysts expect Alphabet to report earnings of $2.18 per share, up from $1.89 last year, and revenue of about $94 billion, which would be an 11% increase from 2024. Much of this growth is expected to come from Google Cloud, which analysts predict will grow by 27% year-over-year thanks to AI demand. However, if this segment disappoints, it could heavily impact how the market reacts to the results.
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Spending on data centers is also drawing attention. Indeed, Alphabet spent $53 billion on capital projects like data centers in 2024, up 63% from the year before, and plans to raise that figure to $75 billion this year. In the first quarter alone, the company spent $17 billion and is expected to spend another $18 billion this quarter. While these investments are important for powering AI tools, they raise questions about whether such high spending is sustainable and if it will lead to enough future profit to justify the cost.
Meanwhile, Google’s advertising business, which accounted for 76% of its revenue in 2024, is expected to grow by 8%, with search ads projected to rise by 9%. Still, AI search engines like those of OpenAI and Perplexity are challenging Google by offering direct answers to questions. This has forced Google to respond with AI summaries and a new “AI Mode” in Search. Nevertheless, YouTube remains a bright spot for Alphabet, with ad and subscription revenue growing faster than the rest of Google’s advertising.
Is Google Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on GOOGL stock based on 30 Buys and nine Holds assigned in the past three months. Furthermore, the average GOOGL price target of $206.51 per share implies 8.8% upside potential.
