Complete Breakdown of Alphabet’s 2Q Earnings

Cloud is now firmly in reacceleration mode. Revenue up 32% year-over-year to $13.6B is strong on its own, but what stood out to me is the operating margin jumping from 11% to over 20%. This isn’t a story of subsidized AI trials — it’s margin-accretive growth with demand that’s showing up in backlog ($106B, up 38% YoY) and billion-dollar deal flow.

In fact, Alphabet signed more $1B+ Cloud deals in the first half of 2025 than in all of 2024. I view this as a strong rebuttal to bears who questioned Google’s ability to compete with AWS and Azure. Gemini adoption is also real in Cloud — 85,000 enterprises now use it, including major brands like Salesforce and BBVA. That’s not experimental AI — that’s production-scale usage. This is the best shape Cloud has been in since 2021. For long-term investors, this is a clear reason to stay long.

Wall Street is responding positively to Alphabet’s Q2, with Barclays raising its price target to $235 (from $220), citing “a lot of great metrics,” including accelerating Cloud revenue and strong Search paid clicks. The firm remains Overweight but flags the pending DOJ remedy decision as a watchpoint.

BofA raised its target to $217, calling the quarter “another strong one,” and arguing that AI is expanding—not cannibalizing—Search monetization. Analyst Justin Post believes the Street may be underestimating long-term upside from Google’s AI stack.

Truist bumped its target to $225, highlighting resilience across Search, YouTube, and Cloud despite macro uncertainty and competitive AI chatter. They noted strong Shorts engagement and continued monetization gains via “All-in-One” ad formats.

Consensus is forming around this narrative: Alphabet is navigating the AI transition from a position of strength, but the magnitude of CapEx ($85B FY25 guidance) will remain a closely watched tension point for investors.

Search showed it’s still the bedrock of Alphabet’s business — and now, AI Overviews and Mode are enhancing that strength, not diluting it. Management said Overviews are lifting global queries by 10% for eligible search types.

I’ve been waiting to see proof that AI-native features could drive usage rather than displace it — this is a tangible step in that direction. With 100M+ MAUs on AI Mode already, and strong mobile engagement via tools like Lens and Circle to Search, Alphabet’s pivot to more agentic and multimodal search experiences looks credible.

These aren’t experiments anymore — they’re scaling products. If Google can keep monetization flat or higher on these AI-infused results (which Philipp Schindler said they are), that’s a huge validation of the model. I’m becoming incrementally more bullish on Search as a defensive and offensive asset, even with Gemini standing alongside it.