Alphabet (NASDAQ: GOOG) delivered another robust quarter.
Revenue for 2Q 2025 grew 14% year-on-year (YOY) to US$96 billion, and earnings per share (EPS) increased by 22% to US$2.31.
Google Search & Others proves the naysayers wrong again by growing this quarter’s revenue by 12% over the previous year.
The emergence of ChatGPT and other AI models has undoubtedly reshaped how we seek information.
Yet, despite concerns about their disruptive potential, the latest figures and personal experience suggest that AI and traditional search can coexist.
I’ve found Google’s integrated AI Overviews particularly useful, offering quick summaries of my searches while still providing the essential links for further exploration.
While a future where AI fundamentally disrupts Google Search remains a possibility, it appears Google is already laying the groundwork for its next chapter.
By then, Google Cloud seems poised to take the lead in driving Alphabet’s growth.
This isn’t just my wishful thinking; it’s a trend clearly supported by current performance, indicating a strategic shift and diversification for the tech giant.
For 2Q 2025, Google Cloud’s revenue jumped by 32% YOY to US$13.6 billions!
That’s more than 14% of the total revenue for the quarter. Compare to two years ago, it only contributed to around 10%.
This growth rate is incredible.
Estimating with the rule of 72, Cloud’s revenue will double in less than three years if it can sustain this growth rate!
The momentum is likely to continue as management guided a continued investment in servers data center, to meet cloud customer demand.
Interestingly, DBS Group (SGX: D05), together with LVMH (EPA: MC) and Salesforce (NYSE: CRM), was mentioned during the earnings call as one of the more than 85,000 enterprises that uses Gemini.
Consequently, capital expenditure (CapEx) for the year is now expected to increase from US$75 billion to US$85 billion for FY 2025, with further increase anticipated for next year.
While the amount is massive, it is well-supported by Google’s operating cash flow.
In the short-term, there will be pressure on profit margin and significant reduction in its free cash flow.
However, these strategic investments would strengthen Google’s competitive edge over the longer term.
Enough for the moment
Alphabet’s 2Q 2025 performance paints a clear picture: a company navigating the AI revolution not by clinging to the past, but by strategically evolving its core businesses.
Recognising this robust fundamental story and seizing the stock’s earlier price dip, I’ve actively increased my investment in Alphabet this year.
It now holds a substantial position as my third-largest US holding, after Arista Networks (NYSE: ANET) and Shopify (NASDAQ: SHOP).
While I can foresee my future regret for not having bought more, my current allocation is aligned with my long-term strategy, and I will be looking for future opportunities to invest.
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