Alphabet is also commonly seen as a laggard in the AI game, as compared to Microsoft or NVIDIA. However, the story is different in its Q2 2025 earnings, with 14 percent growth in revenues. Google Cloud and Search are benefiting because AI is the cornerstone of Alphabet, which has a full-stack advantage with its data, custom chips (TPUs), global platforms, and top AI models, like Gemini. Analysts observe that Alphabet might be underpriced at 20 times income. Although it is in a definitive price war, the overwhelming investment of the company in AI at 85 billion indicates that they are not intending to trail behind.
Alphabet’s Q2 2025 Results Undercut the ‘AI Laggard’ Narrative
Alphabet has long faced skepticism in the AI space, overshadowed by NVIDIA’s hardware dominance and Microsoft’s OpenAI partnership. However, Shay Boloor, strategist at Futurum, argues that perception is outdated. Alphabet holds all four core AI pillars: massive data (Search, YouTube, Android), in-house chips (TPUs), unmatched distribution, and advanced AI brains like Gemini and DeepMind. This ecosystem gives Alphabet a deep advantage that’s now translating into business gains.
In Q2 2025, Alphabet posted 14% revenue growth year-over-year, with Google Cloud up 26.2% and Search delivering double-digit growth. CEO Sundar Pichai confirmed AI is driving these improvements. YouTube, also boosted by AI, grew 13%. Google Cloud now delivers a 21% operating margin and could be worth half a trillion dollars. The company’s $85 billion AI investment for 2025 is focused on Gemini product expansion and AI talent hiring. This is not catch-up; it’s a strategic AI surge.
Undervalued Stock or Caution Flag? Why Investors Are Split
Despite strong fundamentals, Alphabet trades at just 20 times earnings, lower than AI rivals. That valuation could offer upside if the market adjusts to Alphabet’s AI reality. Tesla, another AI-focused firm, is innovating in autonomous driving but lacks Alphabet’s AI research depth. Analysts see Alphabet’s broader AI utility, from enterprise cloud to consumer apps, giving it longer-term defensibility. Its Gemini models are embedded across products, including search enhancements and productivity tools.
Still, competitive pressure from Microsoft and NVIDIA is real. Some investors, reacting to X, advise reducing tech exposure amid AI volatility. Others see Alphabet as a contrarian bet poised to re-rate. With fears over search cannibalization fading, Alphabet still has a $200 billion search business runway. Many believe it’s only a matter of time before markets reprice its AI leadership. The next few quarters may determine whether Alphabet is the most underappreciated player in AI or simply late to the race.
Alphabet’s AI Play Looks Stronger Than Perceived
Alphabet’s latest earnings suggest it’s not falling behind in AI; it’s just taking a different route. With robust cloud growth, a powerful AI stack, and a global platform advantage, the company is quietly scaling AI across its ecosystem. Trading at 20 times earnings, it may be undervalued relative to its potential. But investor sentiment remains mixed amid a noisy, high-stakes AI market. Still, the data supports a simple conclusion: Alphabet is not just in the AI game; it might be better positioned than most think.
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