Alphabet Inc., the parent company of Google and YouTube, reported strong growth for the first quarter of 2025, surpassing expectations. The stock rose by more than 4% in after-hours trading following the release of the earnings report. The results highlight strong performance across several key areas, particularly Google Cloud and YouTube video ads.

Surprising Financial Results

Alphabet reported revenue of $90.23 billion, a 12% increase compared to the previous year, surpassing expectations of $89.12 billion. Earnings per share (EPS) stood at $2.81, a 49% increase compared to the previous year, exceeding Wall Street’s forecast of $2.01 per share.

Additionally, the company reported impressive growth in operating income, which rose by 20%, with an operating margin of 34%, an increase of 2 percentage points compared to the same period last year.

Key Business Segments

In Alphabet’s business segments, YouTube video ads reached $8.93 billion, slightly below analyst expectations of $8.97 billion. However, overall advertising revenue grew by 8.5%, bringing in $66.89 billion.

The company also anticipated a slight decline in ad revenue due to the end of the e-commerce tax exemption for Chinese goods, effective in May. However, Google Search and Google Cloud showed impressive growth, with Google Cloud reporting revenue of $12.26 billion, a 28% increase from the previous year, and achieving an operating margin of 17.8%, nearly double the margin from the previous year.

Significant Profit Growth

Net income increased by 46%, reaching $34.54 billion, or $2.81 per share. This marks a significant improvement from net income of $23.66 billion in the same period last year. Interestingly, part of the profit increase came from an unrealized gain of $8 billion from investments in private companies.

“Other Bets” Segment – Decline and Ongoing Investment

The “Other Bets” segment, which includes Alphabet’s robotics and healthcare projects, reported revenue of $450 million, down 9% from $495 million the previous year. However, Waymo, the autonomous vehicle service, continued to show impressive progress, reporting more than 250,000 paid autonomous rides per week.

Future Plans and Investments

Alphabet announced plans to spend $75 billion on capital expenditures this year, with expectations of fluctuations in quarterly spending due to timing changes in deliveries and construction schedules. Additionally, the board authorized another $70 billion in stock repurchases, which is expected to provide further support for the stock in the short term.

Sundar Pichai – Focus on AI and Cloud

During the Q1 earnings call, Sundar Pichai, Alphabet’s CEO, focused on the company’s successes in artificial intelligence and Google Cloud, particularly with the launch of Gemini 2.5 and the success of AI Overviews in Google Search. Pichai highlighted the impressive growth in Cloud and emphasized the growing demand for AI-powered solutions. While there was no direct mention of quantum computing, this area may play a significant role in the company’s future. Pichai also discussed regulatory challenges, especially regarding the end of the de minimis trade exemption for small goods imports into the U.S.

Expansion in Google Cloud and the Impact of the Technological Revolution in Cloud Computing

The technological revolution in cloud computing continues to reshape the market, and Google Cloud is at the forefront of this transformation. Alphabet is not only seeing growth in sales within this segment but is also focusing its efforts on technological innovation driven by Generative AI—an area it expects to lead in the coming decade. With ongoing investments in new technologies, particularly in AI, the company is creating tailored solutions for businesses, allowing them to harness artificial intelligence to generate innovative content and solutions that can enhance their operations. Alphabet sees Google Cloud as a key engine for its future growth and believes that its investments in this area will yield long-term returns, not just through business solutions but also by leveraging AI capabilities for the future of cloud services.

Conclusion

The Q1 2025 earnings report shows that Alphabet has maintained steady growth despite broader economic pressures. Despite the expected decline in ad revenue due to regulatory changes, the company continues to expand its market share in Google Cloud and advertising, maintaining strong profitability. The impressive growth in profits and revenues signals the company’s successful navigation in an era of increasing competition in AI and cloud computing.