Executive Summary

Alphabet delivered strong Q2 2025 results: revenue rose 14% year over year to $96.43B and operating margin was 32.4%; EPS was $2.31, aided by higher OI&E, though operating margin was partially offset by a legal settlement charge .
Results beat Wall Street: revenue beat consensus by ~$2.39B and EPS beat by ~$0.11; 41 estimates for both EPS and revenue; this sets up positive estimate revisions, especially with continued Cloud momentum and backlog growth. Values retrieved from S&P Global.*
Capex guidance raised materially to approximately $85B for 2025 (from ~$75B in Q1), signaling confidence in demand for AI infrastructure and Cloud; expect higher depreciation and near-term P&L pressure as investment ramps .
Key catalysts: sustained double-digit Search and YouTube ad growth, Cloud revenue up 32% with expanding profitability and backlog; dividend maintained at $0.21 with next payment on Sept 15, 2025 .

What Went Well and What Went Wrong

What Went Well

Broad-based growth: Google Services revenue up 12% to $82.54B; Google Cloud revenue up 32% to $13.62B; Search & other revenue up to $54.19B; YouTube ads to $9.80B; each grew double digits .
Profitability scaling in Cloud: Cloud operating income rose to $2.83B (from $1.17B YoY), with margin expansion supported by efficiency and demand for AI infrastructure and solutions .
Management tone on AI: “We are leading at the frontier of AI and shipping at an incredible pace... AI is positively impacting every part of the business,” said Sundar Pichai; Cloud annual revenue run-rate now >$50B .

What Went Wrong

Legal settlement cost: Operating margin benefits were “partially offset by a charge related to a settlement in principle of certain legal matters,” and total operating expenses included legal and other matters; this pressured reported margins .
Sequential EPS down vs Q1: EPS fell to $2.31 from $2.81 in Q1 2025, reflecting lower OI&E ($2.66B in Q2 vs $11.18B in Q1), and rising depreciation from higher capex .
Near-term ad comps: Management flagged tough YoY comps in H2 2025 due to US election-related brand spend in late 2024, potentially tempering YouTube growth optics .

Financial Results

Metric	Q4 2024	Q1 2025	Q2 2025
Revenue ($USD Billions)	$96.47	$90.23	$96.43
Operating Income ($USD Billions)	$30.97	$30.61	$31.27
Operating Margin (%)	32%	34%	32.4%
OI&E, net ($USD Billions)	$1.27	$11.18	$2.66
Net Income ($USD Billions)	$26.54	$34.54	$28.20
Diluted EPS ($)	$2.15	$2.81	$2.31

Segment and Ad Breakdown

Metric ($USD Billions)	Q4 2024	Q1 2025	Q2 2025
Google Search & other	$54.03	$50.70	$54.19
YouTube ads	$10.47	$8.93	$9.80
Google Network	$7.95	$7.26	$7.35
Google subscriptions, platforms, devices	$11.63	$10.38	$11.20
Google Services total	$84.09	$77.26	$82.54
Google Cloud	$11.96	$12.26	$13.62
Other Bets	$0.40	$0.45	$0.37
Hedging gains (losses)	$0.02	$0.26	$(0.11)
Total TAC	$14.85	$13.75	$14.71

Segment Operating Income (Loss)

Metric ($USD Billions)	Q4 2024	Q1 2025	Q2 2025
Google Services OI	$32.84	$32.68	$33.06
Google Cloud OI	$2.09	$2.18	$2.83
Other Bets OI	$(1.17)	$(1.23)	$(1.25)
Alphabet-level activities	$(2.78)	$(3.03)	$(3.37)

KPIs

KPI	Q4 2024	Q1 2025	Q2 2025
Employees (000s)	183.32	185.72	187.10
Free Cash Flow ($USD Billions)	$24.84	$18.95	$5.30
Capex (Purchases of PP&E, $USD Billions)	$14.28	$17.20	$22.45

Geographic Revenue Growth (Sequential)

Region	Q1 2025 ($B)	Q2 2025 ($B)	Sequential % (as reported)
United States	$43.96	$46.06	5%
EMEA	$25.92	$28.26	9%
APAC	$14.85	$16.48	11%
Other Americas	$5.23	$5.74	10%

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Capital Expenditures	FY 2025	Approximately $75B	Approximately $85B	Raised
Depreciation trajectory	FY 2025	Growth to accelerate in 2025	“Expect the growth rate in depreciation to accelerate further in Q3 2025”	Raised/Accelerating
Cloud revenue growth variability	FY 2025	Variability tied to capacity deployment timing; higher capacity late 2025	Tight demand-supply persists; variability maintained	Maintained
Dividend per share	Q2 2025	$0.21 declared for June 16 payment in Q1	$0.21 payable Sept 15, 2025	Maintained

Earnings Call Themes & Trends

Topic	Q4 2024 (Previous Mentions)	Q1 2025 (Previous Mentions)	Q2 2025 (Current Period)	Trend
AI product cadence	“Building, testing and launching products faster than ever”; Gemini 2.0; AI Overviews in >100 countries	Gemini 2.5 rollout; AI Overviews 1.5B users/month; AI mode early traction	“Leading at the frontier of AI and shipping at an incredible pace”; AI impacting every part of business	Accelerating
Search usage/engagement	Healthy usage growth; innovations like Circle to Search	Longer queries in AI mode; multimodal growth (Circle to Search on >250M devices)	Lens searches up 70% YoY; Circle to Search on >300M devices; more shopping queries	Rising
YouTube ads & monetization	Strong brand growth; election spend doubled vs 2020; living room leadership	Robust watch time; shorts monetization progressing; subscription base growth	Shorts revenue per watch hour parity to in-stream in US; tougher comps ahead in H2	Mixed (structurally strong; near-term comps)
Cloud demand/backlog & profitability	Run-rate goals met; AI infrastructure leadership; Vertex usage surge	Cloud revenue +28% YoY; margin to 17.8%; capex prioritization for capacity	Backlog $106B (+18% seq, +38% YoY); margin expansion continued	Strengthening
Capex and depreciation	FY25 capex focus; infrastructure efficiency gains	FY25 capex ~ $75B; expect accelerating depreciation	FY25 capex raised to ~$85B; further acceleration in depreciation expected	Raised/Accelerating
Regulatory/legal	Ongoing risks; office space optimization 2023 impact	—	Legal settlement charge impacting operating margin	Elevated costs

Management Commentary

Sundar Pichai: “We had a standout quarter… We are leading at the frontier of AI… Search delivered double-digit revenue growth… Cloud had strong growth in revenues, backlog and profitability… With this strong and growing demand for our Cloud products and services, we are increasing our investment in capital expenditures in 2025 to approximately $85 billion” .
CFO on margin drivers: Operating margin benefited from strong revenue growth and efficiencies, “partially offset by a charge related to a settlement in principle of certain legal matters” .
CFO on depreciation: “Given the recent increase in CapEx investments, we expect the growth rate in depreciation to accelerate further in Q3 2025” .
Cloud profitability: “Google Cloud operating income increased… margin expansion driven by strong revenue performance and continued efficiencies… partially offset by higher technical infrastructure usage costs” .

Q&A Highlights

AI strategy and consumer behavior: Management emphasized AI-native experiences expanding query types and engagement, with Lens searches +70% YoY and broader device coverage for Circle to Search; this supports both volume and monetization opportunities over time .
Cloud demand/supply: Tight capacity conditions continue; backlog reached $106B with strong sequential and YoY growth, suggesting sustained demand for AI infrastructure and agents, but quarterly revenue growth may vary with capacity deployment timing .
Expense outlook: Legal settlement charge weighed on Q2 operating expenses; depreciation growth to accelerate with higher capex, creating near-term margin pressure while investments support long-term growth .
YouTube monetization & comps: Shorts monetization improving and living room viewing strong, but H2 2025 will face tough election-driven brand comps; management remains confident in creator ecosystem and ad product innovation .

Estimates Context

Metric	Consensus (Q2 2025)	Actual (Q2 2025)	Surprise
Revenue ($USD)	$94.04B*	$96.43B	+$2.39B*
EPS ($)	$2.198*	$2.31	+$0.11*
# of Estimates	41 (EPS)*	—	—
# of Estimates	41 (Revenue)*	—	—

Values retrieved from S&P Global.*

Key Takeaways for Investors

Core franchise momentum: Double-digit growth across Search, YouTube ads, and Cloud underscores durability and diversified drivers of topline .
Cloud flywheel strengthening: 32% revenue growth, expanding margin, and a $106B backlog point to sustained demand and multi-year visibility; investment pace is rising accordingly .
Investment cycle intensifies: Capex raised to ~$85B for FY25 to support AI infrastructure; expect higher depreciation and near-term margin pressure but improved capacity and product velocity longer term .
Earnings quality dynamics: OI&E contributed significantly in Q2 but was lower than Q1; legal settlement charge impacted operating margin; monitor non-operating items and one-offs in model updates .
Ads outlook: Strong engagement and product innovation (AI Overviews, Lens, Circle to Search) support ad demand; be mindful of H2 comps on YouTube brand after 2024 elections .
Capital returns: Dividend maintained at $0.21; continued buybacks from prior authorization; supports shareholder yield while funding elevated growth investments .
Trading setup: Near-term debates center on margin trajectory amidst capex/depreciation step-up versus Cloud backlog/AI product cadence; Q2 beat and raised capex signal confidence in demand, likely supportive of estimate revisions in Cloud and AI-related segments .

Sources: Alphabet Q2 2025 8-K and press release ; Q1 2025 8-K/press release ; Q4 2024 8-K/press release ; Q1 and Q4 2025 call transcripts ; Q2 2025 call transcript summaries .

Alphabet Inc. (GOOGL)·Q2 2025 Earnings Summary