Alphabet Inc., the parent company of Google and YouTube, has reported a robust set of first-quarter earnings for 2025, showcasing a 12% year-on-year revenue increase to $90.23 billion. The company's net income surged by 49% to $34.54 billion, driven primarily by a strong performance in its core search advertising business and a significant uptick in Google Cloud revenue.
In the first quarter, Google Cloud revenue climbed 28.1% from the previous year, reaching $12.26 billion. This growth is indicative of the increasing demand for cloud services, which continues to outpace capacity. Chief Executive Officer Sundar Pichai expressed optimism regarding the company's financial performance, stating, "We’re pleased with our strong Q1 results, which reflect healthy growth and momentum across the business. Underpinning this growth is our unique full stack approach to AI."
Alphabet's capital expenditures hit a record $17.2 billion during the quarter, with plans to invest a total of $75 billion over the full year—more than double its annual average over the past five years. Pichai emphasized the importance of infrastructure spending for future growth, saying, "Our long-term investments in our global network have positioned us well. Google's network is robust and resilient, supported by over 2 million miles of fiber and 33 subsea cables."
AI has been a focal point for Alphabet's growth strategy. The company recently rolled out Gemini 2.5, which Pichai described as the most intelligent AI model to date, achieving breakthroughs in performance. He noted, "This quarter was super exciting as we rolled out Gemini 2.5, which is widely recognized as the best model in the industry. That's an extraordinary foundation for our future innovation, and we are focused on bringing this to people and customers everywhere."
In the realm of search, Pichai highlighted the impact of AI on enhancing user experience. He noted that AI Overviews, a feature that summarizes search results, has attracted more than 1.5 billion users monthly. He remarked, "AI is one of the most revolutionary technologies for enabling and expanding our information mission. For search, we see it growing the number and types of questions we can answer." The company is continuing to roll out AI Overviews to new countries and users, further enhancing its search capabilities.
In March 2025, Google introduced AI Mode, an experimental feature that expands on AI Overviews by providing advanced reasoning and multimodal capabilities for more complex queries. Pichai mentioned that queries using AI Mode are, on average, twice as long as traditional search queries, indicating a shift in how users engage with the search platform.
Despite the positive earnings report, Alphabet's shares have faced challenges, remaining down 16% year-to-date amid broader tech-sector sell-offs influenced by tariff concerns. Nevertheless, shares jumped nearly 5% in after-hours trading following the earnings announcement.
The company's advertising business continues to be a significant revenue generator, with Google Search advertising bringing in $50.7 billion during the quarter, reflecting a 9.8% increase compared to the previous year. However, concerns loom over the potential impact of U.S. tariff policies on advertising revenue. Google’s Chief Business Officer, Philipp Schindler, warned that the end of the de minimis trade exemption—effective May 2, 2025—could create "a slight headwind" for advertising income, particularly from Asia-Pacific-based retailers.
On the video front, YouTube advertising revenue reached $8.93 billion, up 10% year-on-year, driven by growth in YouTube TV and podcast offerings. Alphabet reported having 270 million paid subscriptions across its services, including YouTube Premium and Google One.
Despite the challenges faced by its self-driving car unit, Waymo, which reported a revenue of $450 million—down 9% from the previous year—Alphabet remains focused on scaling its operations and developing a sustainable business model. CFO Anat Ashkenazi remarked, "Waymo is continuing to progress in building on its impressive technological achievements to scale rapidly and develop a sustainable business model."
Alphabet's board has also approved an additional $70 billion in share buybacks and raised its dividend by 5% to $0.21 per share, reflecting confidence in the company's ongoing growth and profitability.
As Alphabet moves forward, its commitment to artificial intelligence and cloud services appears to be central to its strategy, positioning the company to navigate the competitive landscape while continuing to innovate and expand its offerings.
