It has been about a month since the last earnings report for Alphabet (GOOGL). Shares have added about 13.7% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Alphabet due for a pullback? Well, first let’s take a quick look at the most recent earnings report in order to get a better handle on the recent drivers for Alphabet Inc. before we dive into how investors and analysts have reacted as of late.
Alphabet’s third-quarter 2025 earnings of $2.87 per share beat the Zacks Consensus Estimate by 26.99% and jumped 35.4% year over year.
Revenues of $102.35 billion increased 16% year over year (15% at constant currency). Net revenues, excluding total traffic acquisition costs (“TAC”) (the portion of revenues shared with Google’s partners and the amount paid to distribution partners and others who direct traffic to Google’s website), were $87.47 billion, which surpassed the consensus mark by 3%. The figure rose 17.3% year over year. TAC of $14.88 billion rose 8.4% year over year.
Google Services revenues increased 13.8% year over year to $87.05 billion and accounted for 85.1% of total revenues. The figure beat the Zacks Consensus Estimate by 2.43%.
Google Cloud revenues surged 33.5% year over year to $15.16 billion and accounted for 14.8% of the quarter’s total revenues. The figure beat the Zacks Consensus Estimate by 3.25%.
Search and other revenues increased 14.5% year over year to $56.57 billion, surpassing the Zacks Consensus Estimate by 2.58%. Search and other revenues accounted for 55.3% of total revenues and 76.3% of Google Advertising revenues. Retail and financial services were the largest revenue contributors. Introduction of AI Overviews and AI Mode has driven growth in overall queries, including commercial queries and is creating opportunities for people to connect with businesses and shop on search. AI Max and Search are already used by hundreds of thousands of advertisers, making it the fastest-growing AI-powered search ads product.
YouTube’s advertising revenues improved 15% year over year to $10.26 billion, beating the consensus mark by 2.31%. Paid subscriptions led by Google One and YouTube Premium have surpassed 300 million. Shorts now earn more revenue per watch hour than traditional in-stream on YouTube. Alphabet has introduced a number of AI-powered features that are helping creators offer better content on their channels. AI is now automatically identifying products in creators’ videos that are more shopper-friendly.
Google advertising revenues increased 12.6% year over year to $74.18 billion and accounted for 85.2% of total revenues. The figure beat the consensus mark by 2.3%.
However, Google Network revenues decreased 2.6% year over year to $7.35 billion but beat the consensus mark by 0.03%.
Google subscriptions, platforms and devices revenues, formerly known as Google Other revenues, were $12.87 billion in the third quarter, up 20.8% year over year. The figure beat the consensus mark by 3.23%. Other Bets’ revenues were $344 million, down 11.3% year over year, and accounted for 0.3% of the third-quarter revenues. The figure missed the consensus mark by 19.98%.
Google Cloud ended the reported quarter with $155 billion in backlog, up 46% sequentially. The number of new Google Cloud Platform customers increased by roughly 34% year over year, and 70% of Google Cloud customers now use Alphabet’s AI products. The company has signed more deals worth more than $1 billion through the third quarter of 2025 than GOOGL did in the previous two years combined. Currently, nine of the top 10 AI labs are using Google Cloud.
In third-quarter 2025, revenues from products built on Alphabet’s generative AI models (Gemini, Imagen, Veo, Chirp and Lyria) grew more than 200% year-over-year, reflecting accelerating adoption. Over the past 12 months, each of roughly 150 Google Cloud customers has processed approximately 1 trillion tokens with Alphabet’s models for a wide range of applications.
Alphabet saw double-digit growth in Workspace, driven by an increase in average revenues per seat and the number of seats in the reported quarter.
Third-quarter 2025 costs and operating expenses were $71.12 billion, up 19% year over year. As a percentage of revenues, the figure increased 180 basis points (bps) on a year-over-year basis to 69.5%.
The operating margin was 30.5%, which contracted 180 bps year over year. Excluding the European Commission fine of $3.46 billion, non-GAAP operating margin expanded 160 bps year over year.
Segment-wise, Google Services’ operating margin of 38.5% contracted 180 bps year over year. Google Cloud’s operating income was $3.59 billion compared with $1.95 billion reported in the year-ago quarter.
Other Bets reported a loss of $1.43 billion compared with a loss of $1.12 billion in the year-ago quarter.
As of Sept. 30, 2025, cash, cash equivalents, and marketable securities were $98.5 billion, up from $95.15 billion as of June 30, 2025.
Long-term debt was $21.61 billion as of Sept. 30, 2025, compared with $23.61 billion as of June 30, 2025.
Alphabet generated $48.41 billion of cash from operations in the third quarter of 2025 compared with $27.75 billion in the second quarter of 2025. GOOGL spent $23.95 billion on capital expenditure, generating a free cash flow of $24.46 billion in the reported quarter.
For 2025, Alphabet now expects to spend capital expenditures between $91 billion and $93 billion, up from the previous estimate of $85 billion. The company expects capital expenditure to increase significantly in 2026.
It turns out, fresh estimates have trended upward during the past month.
Currently, Alphabet has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. However, the stock has a grade of D on the value side, putting it in the bottom 40% for value investors.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Interestingly, Alphabet has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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This article originally published on Zacks Investment Research (zacks.com).
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