Is Alphabet a Buy Amid Q2 Beat, AI Visibility and Attractive Valuation?
Alphabet is significantly emphasizing its Ai-capabilities to boost its search engine advertising business and cloud computing business. Alphabet raised its 2025 capital expenditure target to $85 billion from the $75 billion projected earlier.
CEO Sundar Pichai said. 'Our AI infrastructure investments are crucial to meeting the growth in demand from cloud customers.' Pichai also said, 'We are seeing significant demand for our comprehensive AI product portfolio.' CFO Anat Ashkenazi said capital expenditures will rise yet again next year.
Solid Earnings Estimate Revisions for GOOGL Stock
For 2025, the Zacks Consensus Estimate currently shows revenues of $333.75 billion, suggesting an improvement of 13.1% year over year and earnings per share of $9.89, indicating an increase of 23% year over year. The Zacks Consensus Estimate for the current year has improved 3.6% in the last seven days.
For 2026, the Zacks Consensus Estimate currently shows revenues of $373.75 billion, suggesting an improvement of 12% year over year and earnings per share of $10.56, indicating an increase of 6.7% year over year. The Zacks Consensus Estimate for next year has improved 4% in the last seven days.
GOOGL currently has a long-term (3-5 years) EPS growth rate of 14.9%, well above the S&P 500's long-term EPS growth rate of 12.6%.
Extensive AI Infusion for Search Engine
Alphabet is relying heavily on AI to maintain its search engine dominance. GOOGL is facing stiff competition from Microsoft Corp. MSFT and Baidu Inc. BIDU. Despite competition, GOOGL is currently accounting for nearly 90% global market share followed by almost 4% of Microsoft's Bing.
In the last reported quarter, Google Search and other revenues increased 11.7% year over year to $54.19 billion, surpassing the Zacks Consensus Estimate by 3.04%. Overall queries and commercial queries on Search continued to grow year over year in the reported quarter.
Alphabet is advancing visual and contextual search capabilities. The Circle to Search feature is now active on more than 300 million devices. GOOGL is adding functionalities to help people explore complex topics and ask follow-up questions without switching apps.
AI Overviews now reach more than 2 billion users per month and are available in over 200 countries across 40 languages. GOOGL is now driving over 10% more queries globally. Powered by Gemini 2.5, AI Overviews currently delivers the fastest AI responses in the industry. The combination of lens or Circle to Search, together with AI Overviews, is driving multimodal search usage.
Google's AI-powered Search features are driving deeper engagement, with AI Mode offering advanced reasoning and multimodal responses. Users are generating queries twice as long as those in traditional searches. The launch of AI Mode in the United States and India — where it currently has more than 100 million monthly active users — is expected to drive further growth.
AI-Powered Cloud Computing Business
Google Cloud has solidified its position as the third-largest provider in the highly competitive cloud infrastructure market against Amazon.com Inc. 's AMZN cloud arm, Amazon Web Services, and Microsoft's Azure.
GOOGL is cashing in on the increasing demand for Large Language Models with its most powerful AI model called Gemini. Google Bard and Search Generative Experience are powered by Gemini Pro to deliver an enhanced user experience. Google Cloud offers Duet AI, which provides pre-packaged AI agents that assist developers in writing, testing, documenting and operating software.
GOOGL launched Gemma 3, a collection of lightweight, state-of-the-art open models that can run on a single GPU or Tensor Processing Unit (TPU). At its Cloud Next 2025 conference in Las Vegas, Alphabet unveiled Ironwood, its seventh-generation TPU, expected to be available later this year.
Google Cloud unveiled its Cloud Wide Area Network, giving enterprises access to its private global fiber network. Alphabet also showcased Willow, its new quantum chip while on the AI model front, Alphabet launched Gemini 2.5, its most advanced reasoning model, alongside Gemini 2.5 Flash, a low-latency, cost-efficient version tailored for developers.
Product Diversification
Alphabet's self-driving business — Waymo — has recently gathered significant pace. GOOGL is scaling up this business, providing around 250,000 rides per week at present. Alphabet is also looking for opportunities to introduce this service to several new cities.
As per Pichai, 'The team is testing across more than 10 cities this year, including New York and Philadelphia. We hope to serve riders in all 10 in the future.' Waymo is using GOOGL's cloud computing, AI infrastructure and mapping data to serve customers.
Lucrative Valuation of GOOGL Shares
Alphabet currently carries a forward P/E of 19.52X for the current financial year, compared with 20.42X of the industry and 19.96X of the S&P 500. GOOGL has a return on equity of 34.31% compared with 4.01% of the industry and 16.88% of the S&P 500 Index.
Investment Thesis for GOOGL Shares
Year to date, shares of Alphabet lagged the broad-market index — the S&P 500. However, the stock received huge momentum in the past three months, in which it jumped more than 20% compared with around 16% gain of the S&P 500. In the past month, GOOGL advanced 9.8%, while the S&P 500 rose 3.2%.
Alphabet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
At this stage, it will be prudent to buy GOOGL on every dip. Hold this stock for the long term as the company's extensive AI thrust and robust future projections will generate more value.
5 Stocks Set to Double
Each was handpicked by a Zacks expert as the favorite stock to gain +100% or more in the months ahead. They include
Stock #1: A Disruptive Force with Notable Growth and Resilience
Stock #2: Bullish Signs Signaling to Buy the Dip
Stock #3: One of the Most Compelling Investments in the Market
Stock #4: Leader In a Red-Hot Industry Poised for Growth
Stock #5: Modern Omni-Channel Platform Coiled to Spring
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor. While not all picks can be winners, previous recommendations have soared +171%, +209% and +232%.
Download Atomic Opportunity: Nuclear Energy's Comeback free today.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Amazon.com, Inc. (AMZN): Free Stock Analysis Report
Microsoft Corporation (MSFT): Free Stock Analysis Report
Baidu, Inc. (BIDU): Free Stock Analysis Report
Alphabet Inc. (GOOGL): Free Stock Analysis Report
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Globe and Mail
10 minutes ago
- Globe and Mail
This Quantum Computing Company Just Unlocked a New AI Breakthrough
Key Points Rigetti has achieved a significant error rate reduction with a 36-qubit system. This could pave the way for quantum computers with more qubits that can be used for AI. There's still a long way to go, though -- and Rigetti's stock remains a speculative bet. 10 stocks we like better than Rigetti Computing › What are currently the two hottest technologies? Artificial intelligence (AI) deserves a spot at the top, for sure. There's a strong case for quantum computing taking second place. Not so coincidentally, these two technologies are joined at the hip in some ways. When a key milestone is achieved in quantum computing, it can translate to a step forward for AI, too. That appears to be the case with a recent announcement from Rigetti Computing (NASDAQ: RGTI). This quantum computing company arguably just unlocked a new AI breakthrough. Rigetti's breakthrough On July 16, 2025, Rigetti Computing revealed that it had achieved 99.5% median 2-qubit gate fidelity with its modular 36-qubit quantum computing system. This reflected a halving of the company's best 2-qubit gate error rate with its 84-qubit Ankaa-3 system. If all that sounds like techno-gobbledygook to you, you're not alone. Quantum computing is complicated, with jargon that can be confusing. Let's try to make sense of Rigetti's breakthrough. First, qubits (short for "quantum bits") are similar to the binary bits 0 and 1 used in traditional computers. The big difference is that qubits can be 0, 1, or even both simultaneously. Quantum gates are the building blocks of quantum circuits. They're like logic gates used in traditional computers (such as AND, OR, and NOT) to perform operations. What does it mean that Rigetti achieved 99.5% median 2-qubit gate fidelity? When 2 qubits interact in a "gate" operation, the result is correct 99.5% of the time, with an error rate of five in 1,000 operations. The fewer errors, the more useful a quantum computer is. What does improved quantum gate error rates mean for AI? Rigetti didn't mention AI at all in its announcement. However, its quantum computing breakthrough could have important ramifications for AI. Error correction ranks as one of the biggest problems with quantum computers today. Too many errors make a quantum computer useless in practical applications. That's especially the case with AI, which requires multiple iterations and a high degree of precision in its under-the-hood processing. However, lower error rates allow quantum computers to run longer and use more quantum gates before the accumulated errors cause major problems. It also paves the way for quantum computers with more qubits, which will be a must for training and deploying large-scale AI models. We're seeing this with Rigetti already. The company made its breakthrough on a 36-qubit system. However, it plans to release a 100-plus-qubit system that will have 99.5% median 2-qubit gate fidelity before the end of this year. CEO Subodh Kulkarni stated, "By leveraging well-known techniques from the semiconductor industry, we've developed proprietary technology that we believe is critical to enable scaling to higher qubit count systems." Now for a reality check: Five errors in 1,000 operations isn't nearly good enough. The error rate needs to fall to around one in a million for quantum computers to run useful applications. Some more complex applications will need error rates of one in a billion or better. However, Rigetti's achievement is nonetheless an important milestone in getting to these lower error rates. Is Rigetti Computing stock a smart pick to buy now? If you want to know how significant investors viewed Rigetti's breakthrough, just look at its stock chart. The quantum computing company's share price soared after its announcement earlier this month. Over the last three months, Rigetti stock is up close to 80%. Is this quantum computing stock a smart pick to buy now? Not for risk-averse investors. Rigetti remains unprofitable. It also faces stiff competition from both large and small companies scrambling to develop quantum computers. There's no guarantee that Rigetti will be among the winners in quantum computing over the long run. However, aggressive investors who are willing to take on considerable risk might find Rigetti appealing. It's a speculative stock, to be sure. But if Rigetti can continue to make the technological advances needed to build a practical, large-scale quantum computer, it's likely to be a huge winner over the next decade and beyond. Should you invest $1,000 in Rigetti Computing right now? Before you buy stock in Rigetti Computing, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Rigetti Computing wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $625,254!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,090,257!* Now, it's worth noting Stock Advisor's total average return is 1,036% — a market-crushing outperformance compared to 181% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025
Globe and Mail
36 minutes ago
- Globe and Mail
Wall Street Is Watching This One Metric in Nvidia's Q2 -- Can It Deliver?
Nvidia (NASDAQ: NVDA) recently became the world's first $4 trillion tech titan -- but the second quarter could be the spark for its next mega move. With quantum computing breakthroughs, artificial intelligence (AI) networking dominance, and a stealth China rebound on the horizon, this earnings report might deliver more than Wall Street expects. *Stock prices used were the market prices of July 28, 2025. The video was published on Aug. 2, 2025. Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue » Should you invest $1,000 in Nvidia right now? Before you buy stock in Nvidia, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you'd have $624,823!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you'd have $1,064,820!* Now, it's worth noting Stock Advisor's total average return is 1,019% — a market-crushing outperformance compared to 178% for the S&P 500. Don't miss out on the latest top 10 list, available when you join Stock Advisor. See the 10 stocks » *Stock Advisor returns as of July 29, 2025 Rick Orford has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy. Rick Orford
Globe and Mail
2 hours ago
- Globe and Mail
Stocks in play: Bausch + Lomb Corporation
Today announced its second-quarter 2025 financial results. Revenue of $1.278 Billion. GAAP Net Loss of $62 Million. Bausch + Lomb Corporation shares are trading down $0.43 at $19.74.
