Alphabet Inc., the parent company of Google, has announced a strong financial performance for the second quarter of 2025, with net profits increasing by 19%. The company's revenue rose to $96.4 billion, a 14% increase compared to the same period last year. This growth was driven by strong performances across various business segments, including Google Search, YouTube ads, Google Cloud, and subscriptions. Earnings per share (EPS) also saw a significant jump, increasing by 22% to $2.31.
The standout performer in Alphabet's portfolio was Google Cloud, which experienced a remarkable 32% increase in revenue, reaching $13.6 billion. This growth was fueled by increasing demand for Google Cloud Platform (GCP) products, AI infrastructure, and generative AI solutions. Google Cloud's operating income more than doubled, climbing to $2.83 billion from $1.17 billion in the previous year, with the operating margin improving from 11.3% to 20.7%.
Alphabet CEO Sundar Pichai highlighted the company's leadership in artificial intelligence (AI) and its rapid pace of innovation. He noted that AI is positively impacting all aspects of the business, driving significant momentum. Pichai specifically mentioned the success of new features like AI Mode and AI Overviews.
AI Mode, an "end-to-end AI Search experience," has gained substantial traction in both the United States and India. Launched in the US in late May and in India earlier in July, AI Mode already boasts over 100 million monthly active users across these two countries. This rapid adoption indicates the appeal and utility of AI-powered search functionalities for users in diverse markets. Furthermore, AI Overviews are being used by over 2 billion monthly users across more than 200 countries and territories, supporting 40 languages.
Alphabet is making "robust" progress on agentic AI, which is designed to handle complex tasks assigned by users, sometimes with little human interaction required. Pichai expects that 2026 will be the year in which people use agentic experiences more broadly.
The company is also increasing its investment in capital expenditures to approximately $85 billion in 2025, a significant jump from the previous forecast of $75 billion. This substantial investment reflects the growing demand for Alphabet's cloud products and services, particularly in the AI domain. CFO Anat Ashkenazi noted that the increased capital expenditure would be directed towards servers, data centers, and networking equipment.
YouTube also contributed to Alphabet's strong performance, with ad revenue growing 13% to $9.8 billion. This growth was driven by direct response advertising, followed by brand advertising. Google Search also delivered double-digit revenue growth.
Despite the positive results, Alphabet faces challenges, including increasing competition in the AI space and potential regulatory hurdles. The company's rising capital expenditures also initially concerned investors, causing a temporary dip in the stock price. However, reassurance from Alphabet executives during a conference call led to a rebound in the stock price.
