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GOOGL (Alphabet, Google): Weak Stock Performance, but How Did Q1 2025 Earnings Turn Out?

https://lojoolodo24.blogspot.com/2025/06/why-is-alphabet-googl-google-lagging.html

In a previous post, we explored the reasons behind Alphabet’s (GOOGL, Google) sluggish stock performance. So, how did Google's latest earnings fare? Is this an undervalued stock with strong fundamentals, or is it struggling to adapt to industry changes?

Google’s Business Segments

Google's business is mainly divided into Google Services (advertising, subscriptions & platforms, devices) and Google Cloud. While search and YouTube remain the core of its advertising business, subscription and platform revenue are growing. Cloud services, fueled by AI, are expanding rapidly but face fierce competition.

1. Google Services: Advertising, Subscriptions & Platforms, Devices

  • Google Advertising

    • Google Search & Others: Revenue from Google Search, Gmail, Maps, Google Play, and affiliated search partners
    • YouTube Ads: Ad revenue generated from the YouTube platform
    • Google Network Ads: Revenue from external websites using AdMob, AdSense, Google Ad Manager

  • Google Subscriptions, Platforms & Devices

    • Consumer subscriptions: YouTube TV, YouTube Music & Premium, NFL Sunday Ticket, Google One
    • Platforms: Revenue from app purchases and in-app transactions via Google Play
    • Devices: Sales of Pixel smartphones, tablets, and other hardware

2. Google Cloud

  • Google Cloud Platform (GCP): AI infrastructure, Vertex AI, Gemini for Google Cloud, cybersecurity, and data analytics
  • Google Workspace: Gmail, Calendar, Docs, Drive, Meet (including Gemini for Google Workspace)
  • Other enterprise services

Google’s Q1 2025 Earnings: Strong Performance in Both Google Services & Google Cloud

Revenue & Operating Income (in million USD)

Category Q1 2024 Q1 2025 YoY Growth (%)
Revenue
Google Services 70,398 77,264 9.8%
Google Cloud 9,574 12,260 28.0%
Other Businesses 495 450 -9.1%
Hedging Gains/Losses 72 260 261.1%
Total Revenue 80,539 90,234 12.0%
Operating Income
Google Services 27,897 32,682 17.2%
Google Cloud 900 2,177 141.9%
Other Businesses -1,020 -1,226 -20.2%
Alphabet-Level Activities -2,305 -3,027 -31.3%
Total Operating Income 25,472 30,606 20.1%

Revenue Breakdown (in million USD)

Category Q1 2024 Q1 2025 YoY Growth (%)
Google Search & Others 46,156 50,702 9.9%
YouTube Ads 8,090 8,927 10.4%
Google Network Ads 7,413 7,256 -2.1%
Total Google Ads 61,659 66,885 8.5%
Google Subscriptions, Platforms & Devices 8,739 10,379 18.8%
Google Services Total 70,398 77,264 9.8%
Google Cloud 9,574 12,260 28.0%
Total Revenue 80,539 90,234 12.0%

Google's Q1 2025 revenue grew 12.0% YoY to $90.2 billion. Google Services and Google Cloud saw revenue increases of 9.8% and 28.0%, respectively, with operating income also rising. Notably, Google Cloud’s operating income surged 141.9% YoY, yet its contribution to overall profitability remains modest at 7.1%.

Revenue from Google Search & YouTube Ads continued to rise, supporting Alphabet’s overall earnings. However, Google Network Ads showed a decline, and other ventures (Waymo, Verily, etc.) continued to generate losses.

Conclusion

Google remains a dominant global platform, but AI-driven industry shifts, cloud growth trajectory, and changes in search engine dominance create short-term uncertainties. The stock's recent underperformance is unlikely to be resolved quickly.

For Q2 earnings (July 29), key areas to watch include Google Cloud’s growth rate, AI investments, ad market share, and revenue trends.

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