Alphabet (GOOG, Financial) has faced scrutiny over its significant investments in AI technology and infrastructure. However, the company's strong Q1 2025 results reveal that these investments are yielding positive returns. The adoption of AI-powered features in Search and Cloud, combined with controlled expenses—up only 8% year-over-year—boosted EPS by 49% to $2.81, surpassing expectations. Additionally, GOOG announced a new stock repurchase plan, authorizing the buyback of up to $70 billion in Class A and Class C shares.
GOOG's results also alleviate concerns about a potential downturn in the digital advertising market due to tariffs and economic uncertainty. During the earnings call, executives noted healthy advertiser demand, particularly in finance, retail, and travel sectors, which is promising for Meta Platforms (META, Financial) and Pinterest (PINS, Financial) as they prepare to release their Q1 earnings. However, Chief Business Officer Philipp Schindler expressed caution regarding Q2 advertising revenue, citing macroeconomic headwinds.
- Search & Other revenue grew nearly 10% year-over-year to $50.7 billion, driven by AI Overviews, which serves 1.5 billion users monthly, enhancing engagement and advertiser outcomes.
- YouTube Ads revenue reached $8.9 billion, a 10% increase, supported by growth in paid subscriptions like YouTube Music and Premium, which surpassed 125 million subscribers.
- Google Cloud exceeded expectations with a 28% year-over-year revenue increase to $12.3 billion, led by demand for products like Vertex AI and Gemini AI models.
- Despite economic uncertainties, GOOG maintained its capex forecast of $75 billion for FY25, emphasizing its commitment to AI and cloud leadership.
GOOG's strong Q1 performance showcases resilience across Search, YouTube, and Cloud, fueled by AI advancements. The substantial stock buyback program and a 5% increase in the quarterly dividend highlight GOOG's focus on long-term shareholder value.
