Sign in
AI

Alphabet Inc. (GOOGL)·Q1 2025 Earnings Summary

Executive Summary

  • Alphabet delivered a strong Q1 2025: revenue rose 12% to $90.23B, operating margin expanded 200 bps to 34%, and diluted EPS increased 49% to $2.81, supported by double‑digit growth in Search, YouTube ads, subscriptions, and Cloud .
  • Results materially beat Wall Street consensus: revenue beat by ~$1.08B and EPS by ~$0.80; however, EBITDA was below consensus, implying higher depreciation and content costs weighed on EBITDA metrics despite strong operating results (values from S&P Global)*.
  • Cloud revenue grew 28% to $12.26B with operating margin up to ~17.8%, while Services operating margin reached ~42.3%; Other Income surged on an ~$8.0B unrealized gain from a private investment, boosting OI&E to $11.18B .
  • Capital returns accelerated: dividend raised 5% to $0.21 and a new $70B buyback authorization; management reiterated ~$75B FY25 CapEx and flagged depreciation acceleration and Cloud capacity timing variability as key 2025 factors .
  • Near‑term stock reaction catalysts: AI product momentum (AI Overviews at 1.5B monthly users), stronger Search monetization at “approximately the same rate” in AI Overviews, and Cloud margin expansion vs. headwinds from depreciation and de minimis changes affecting APAC retailers .

What Went Well and What Went Wrong

What Went Well

  • Double‑digit revenue growth across Search, YouTube ads, subscriptions, and Cloud; operating margin expanded 200 bps to 34% and EPS up 49% YoY to $2.81 .
  • Cloud scaling profitably: revenue +28% to $12.26B; operating margin increased to ~17.8% as GCP and Workspace drove mix improvements .
  • AI engagement and monetization: AI Overviews at 1.5B monthly users; monetization “approximately the same rate” as traditional formats, supporting ad performance. Quote: “For [AI Overviews] overall, we continue to see monetization at approximately the same rate...” .

What Went Wrong

  • EBITDA underperformed consensus despite strong GAAP operating metrics, reflecting higher depreciation from elevated TI investments and content acquisition costs (values from S&P Global)*; management expects depreciation growth to accelerate through 2025 .
  • Network ads declined 2% YoY, continuing to pressure TAC‑heavy lines despite overall ad strength .
  • 2025 revenue outlook flagged risks: lapping strength in Financial Services (insurance), Cloud capacity deployment timing could cause quarterly variability, and de minimis changes create a slight APAC headwind .

Financial Results

MetricQ1 2024Q3 2024Q4 2024Q1 2025
Revenues ($USD Billions)$80.54 $88.27 $96.47 $90.23
Diluted EPS ($)$1.89 $2.12 $2.15 $2.81
Operating Income ($USD Billions)$25.47 $28.52 $30.97 $30.61
Operating Margin (%)32% 32% 32% 34%
Other Income (Expense), net ($USD Billions)$2.84 $3.19 $1.27 $11.18
Segment Revenues ($USD Billions)Q1 2024Q3 2024Q4 2024Q1 2025
Google Services$70.40 $76.51 $84.09 $77.26
Google Cloud$9.57 $11.35 $11.96 $12.26
Other Bets$0.50 $0.39 $0.40 $0.45
Segment Operating Income ($USD Billions)Q1 2024Q3 2024Q4 2024Q1 2025
Google Services$27.90 $30.86 $32.84 $32.68
Google Cloud$0.90 $1.95 $2.09 $2.18
Other Bets$(1.02) $(1.12) $(1.17) $(1.23)
Alphabet‑level activities$(2.31) $(3.17) $(2.78) $(3.03)
KPIsQ1 2024Q3 2024Q4 2024Q1 2025
TAC ($USD Billions)$12.95 $13.72 $14.85 $13.75
Employees (#)180,895 181,269 183,323 185,719
Free Cash Flow ($USD Billions)—$17.64 $24.84 $18.95
CapEx ($USD Billions)—$13.06 $14.28 $17.20
Cloud Operating Margin (%)~9.4% ~17% ~17.5% ~17.8%
Geographic Revenues ($USD Billions)Q1 2024Q1 2025YoY Change (As Reported)
United States$38.74 $43.96 +13%
EMEA$23.79 $25.92 +9%
APAC$13.29 $14.85 +12%
Other Americas$4.65 $5.23 +12%
Q1 2025 Actual vs S&P Global ConsensusConsensusActualBeat / (Miss)
Revenue ($USD Billions)$89.16*$90.23 +$1.08*
Diluted EPS ($)$2.01*$2.81 +$0.80*
EBITDA ($USD Billions)$38.81*$35.09*($3.72)*

Values retrieved from S&P Global.*

Guidance Changes

MetricPeriodPrevious GuidanceCurrent Guidance / UpdateChange
CapExFY 2025~$75B (Q4 call) Reiterated; expect quarterly fluctuations Maintained
CapEx (Q1)Q1 2025$16–$18B (Q4 call) Reported $17.20B In‑line
DepreciationFY 2025Growth to accelerate (vs 2024’s +28%) Accelerating through 2025; +31% YoY in Q1 Raised (headwind)
Ads – Financial ServicesFY 2025Lapping strong insurance comps Lapping impact reiterated for 2025 Maintained (headwind)
Cloud Revenue GrowthFY 2025Variability based on capacity deployment Tight demand‑supply; variability reiterated; higher deployment later in 2025 Maintained
DividendOngoing$0.20 in Q4 2024 Raised 5% to $0.21; payable June 16, 2025 Raised
Share RepurchaseOngoing—New $70B authorization (Class A/C) New

Earnings Call Themes & Trends

TopicQ3 2024 (Q‑2)Q4 2024 (Q‑1)Q1 2025 (Current)Trend
AI/Technology initiativesBroad AI stack; Gemini in products; Circle to Search >150M devices; Lens 20B visual searches/month Gemini 2.0 progress; Vertex AI 5x customer increase; data centers 4x compute/energy; YouTube #1 streaming watch time Gemini 2.5 rollout; AI Overviews 1.5B monthly users; active users in AI Studio/API +200% YTD Accelerating productization
Search monetizationAds within AI Overviews testing; monetization roughly in line Expanded ads within AI Overviews; monetization “approximately the same rate” Monetization still “approximately the same rate”; commercial queries increasing Stable monetization; higher engagement
Cloud growth/marginsRevenue +35% to $11.4B; margin ~17% Revenue +30% to $12.0B; margin ~17.5%; capacity constrained Revenue +28% to $12.26B; margin ~17.8%; tight demand‑supply Strong growth; margin expansion; capacity gating
Macro/tariffsAPAC retailers boosted 2H23 comps; EU fine cash impact FX headwind and leap year comparison flagged for Q1 2025 De minimis change a slight ads headwind (APAC); still broad strength Mild macro headwinds
R&D execution/cost disciplineCost base reengineering; office space charges OpEx discipline; Q4 OpEx -1% YoY; reiterated efficiency focus Depreciation rising (+31% YoY); continued efficiency in OpEx and TI utilization Efficiency offsets depreciation pressure
Regulatory/legalEU shopping fine paid ($3B) affected cash flow Legal/other matters noted in G&A G&A +17% YoY on legal/other charges Ongoing legal costs
YouTube performanceAds +12%; Shorts monetization gap narrowing Ads +14% (election spend); Shorts monetization +30ppt in U.S. DR and brand strong; Shorts engaged views +20% QoQ; podcast MAUs >1B Healthy growth; improved monetization

Management Commentary

  • Sundar Pichai: “AI Overviews is going very well with over 1.5 billion users per month... Driven by YouTube and Google One, we surpassed 270 million paid subscriptions” .
  • Philipp Schindler: “For [AI Overviews] overall, we continue to see monetization at approximately the same rate, which gives us a strong base on which we can innovate even more” .
  • Anat Ashkenazi: “We still expect to invest approximately $75 billion in CapEx this year... we expect the growth rate in depreciation to accelerate throughout 2025” .
  • Sundar Pichai on Cloud momentum: “We are the leading cloud solution for companies looking to the new era of AI agents… significant demand for our solutions” .

Q&A Highlights

  • Ads monetization and AI Overviews: Management reiterated monetization near parity vs traditional formats; declined to detail click/conversion but emphasized positive engagement .
  • Cloud capacity constraints: CFO confirmed tight demand‑supply; revenue growth variability tied to capacity deployment timing, with higher deployment later in 2025 .
  • Expense outlook: Depreciation up 31% YoY in Q1; growth expected to accelerate through 2025; continued OpEx efficiency and moderated compensation growth .
  • Macro headwinds: De minimis changes will cause slight ads headwind, mostly for APAC‑based retailers; otherwise broad‑based strength across verticals .
  • YouTube DR/brand: DR strength driven by AI‑powered campaign tools and Shorts progress; brand holding up with cultural moments like March Madness .

Estimates Context

MetricQ1 2025 ConsensusQ1 2025 ActualBeat / (Miss)
Revenue ($USD Billions)$89.16*$90.23 +$1.08*
Diluted EPS ($)$2.01*$2.81 +$0.80*
EBITDA ($USD Billions)$38.81*$35.09*($3.72)*

Values retrieved from S&P Global.*

Implications: Expect upward revisions to FY25 EPS and revenue trajectories given the magnitude of Q1 beats, partially offset by EBITDA misses from rising depreciation and content costs (values from S&P Global)*. Management’s reiterated CapEx and depreciation outlook suggests consensus margin paths may need to reflect higher D&A drag through 2025 .

Key Takeaways for Investors

  • Search/AI monetization proving resilient: AI Overviews engagement is high and monetization parity supports ad growth, reducing near‑term cannibalization fears .
  • Cloud scaling profitably, but capacity is the governor: Near‑term revenue growth will correlate with capacity on‑lining; margin trajectory remains positive .
  • Operating leverage vs EBITDA optics: Strong operating margin expansion but EBITDA below consensus highlights elevated depreciation as the main headwind (values from S&P Global)* .
  • Capital deployment confidence: $70B buyback and dividend increase signal balance sheet strength and cash flow visibility .
  • Watch macro and policy: De minimis change introduces slight APAC retail headwind; FX and calendar effects impacted Q1 comps .
  • AI product cadence is an upside catalyst: Gemini 2.5, agents, and multimodal search features underpin usage and monetization upside across Services and Cloud .
  • Near‑term trading lens: Favor positive revisions to EPS/revenue; anticipate debates around D&A drag and Cloud capacity timing; positioning should weigh durable Search/YouTube performance against margin headwinds .

Other Relevant Press Releases (Q1 2025)

  • NVIDIA collaboration: Alphabet and NVIDIA announced initiatives to advance AI and AI‑optimized infrastructure; Google Cloud among the first to adopt new NVIDIA Blackwell solutions, and SynthID adoption to bolster AI content transparency .