Alphabet’s second quarter numbers came in hot. But the heat didn’t translate. Revenue hit $96.43 billion, up 14% year-over-year. Net income landed at $28.2 billion. EPS printed $2.31, beating the $2.27 estimate. Operating margin held at 32%. On paper, it’s a beat. But under the hood, the cost of growth is climbing faster than the growth itself.
Capex surged to $22 billion. That’s up from $17.8 billion last quarter. The spend added $12 billion in revenue. That’s a 1.83x return. Not terrible, but not efficient. Cloud revenue rose to $13.62 billion, up 32%. Search brought in $54.19 billion. Advertising totaled $71.34 billion. Subscriptions and devices added $11.20 billion. YouTube ads hit $9.79 billion. Google Services overall reached $82.5 billion.
Alphabet’s market cap sits at $2.33 trillion. Shares closed at $190.23. Post-market ticked up to $193.70. Volume hit 58.7 million. P/E ratio now 21.33. Dividend yield 0.44%. Stock is down 0.58% on the day. Up 7.2% since May. But lagging behind semis and cloud peers.
The company raised full-year capex guidance to $85 billion. That’s a $10 billion jump. CFO Anat Ashkenazi said depreciation will accelerate in Q3. Cloud backlog reached $106 billion. Paid clicks rose 4%. YouTube Shorts now match in-stream ad revenue per watch hour in the U.S. Gemini app usage crossed 450 million monthly active users. Token processing doubled since May.
One analyst from Mountain View said, “They’re spending like it’s 2021, but the returns feel like 2019.” The AI push is real. But monetization is slow. Gemini infrastructure is expanding. Workspace and Vertex AI adoption is rising. But margins are under pressure. Legal costs added $1.4 billion this quarter. Server delivery timing and data center construction are driving the capex spike.
Waymo passed 100 million autonomous miles. Expansion confirmed in Atlanta and Austin. Google Lens searches up 70%. Shopping queries are driving incremental growth. Cloud operating margin improved to 20.7%. Cloud revenue run-rate now over $50 billion. But the infrastructure bottleneck remains. Supply constraints are expected to persist into 2026.
Alphabet repurchased $13.6 billion in stock. Paid $2.5 billion in dividends. Free cash flow for the quarter was $5.3 billion. Trailing twelve-month FCF sits at $66.7 billion. But the quarterly dip reflects the capex surge and tax payments.
The numbers are strong. But the efficiency is slipping. Alphabet is chasing scale. The question is whether the spend will translate into durable growth or just bigger infrastructure.
Sources:
https://abc.xyz/assets/cc/27/3ada14014efbadd7a58472f1f3f4/2025q2-alphabet-earnings-release.pdf
https://9to5google.com/2025/07/23/alphabet-q2-2025-earnings/
Disclaimer: Not financial advice. Do your own research.