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Can GOOGL's Cloud Investments Push the Stock Higher in 2025?
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Alphabet (GOOGL - Free Report) shares have returned 26.4% in the trailing 12-month period, outperforming the Zacks Computer & Technology sector and the Zacks Internet Services industry. Over the same timeframe, the sector and the industry have returned 20.7% and 23.7%, respectively.
However, GOOGL shares fell more than 9% since it reported fourth-quarter 2024 results, reflecting slowing Google Cloud revenues. In the reported quarter, Google Cloud revenues surged 30.1% year over year to $11.955 billion and accounted for 12.4% of the quarter’s total revenues. The figure lagged the Zacks Consensus Estimate by 1.51%.
Alphabet exited 2024 with an annual run rate of $110 billion for its Cloud and YouTube businesses. GOOGL now expects to invest roughly $75 billion in capital expenditures in 2025, which is aimed to build up technical infrastructure, primarily for servers followed by data centers and networking.
This is expected to help GOOGL compete with the likes of Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) in the cloud computing domain.
However, Alphabet is suffering from a lack of capacity and until new capacity comes online in 2025, cloud revenues are expected to see increased variability. This doesn’t bode well for investors and is expected to remain an overhang on the shares.
GOOGL Stock’s Performance
Image Source: Zacks Investment Research
Can Expanding AI Expertise Aid GOOGL’s Prospects?
Alphabet is leveraging Artificial Intelligence (AI) to attract new clients, win larger deals and deepen product adoption among existing customers.
GOOGL’s Gemini models, along with Generative AI (Gen AI) video and image generation models, Veo 2, and Imagen 2, are currently used by more than 4.4 billion developers across products and platforms.
GOOGL has been expanding its AI proficiency through the frequent update of its models. In December, Alphabet unveiled Gemini 2.0, its most capable model that powers AI agents.
Alphabet launched Gemini 2.0 flash, its workhorse model with low latency and enhanced performance. Earlier this year, Alphabet updated 2.0 Flash Thinking Experimental in Google AI Studio.
The company has made an updated 2.0 Flash available to all users of the Gemini app on desktop and mobile. Most recently, Alphabet made the updated Gemini 2.0 Flash generally available via the Gemini API in Google AI Studio and Vertex AI.
AI Improves Alphabet’s Search & Cloud Businesses
Alphabet’s seven AI-enabled products and platforms are currently used by more than 2 billion users. AI is powering Search with Gemini supporting AI overviews. Circle to Search is driving additional Search and is gaining popularity among younger users.
AI developer platform Vertex AI is gaining rapid adoption with five times increase in customers year-over-year in fourth-quarter 2024. Vertex usage increased 20 times during 2024, with strong developer adoption of Gemini Flash, Gemini 2.0, Imagen 3 and Veo.
Alphabet saw strong demand for Trillium, its sixth-generation TPU, which delivers four times better training performance and three times greater inference compared with the previous generation. In collaboration with NVIDIA (NVDA - Free Report) GOOGL delivered H200-based platforms to customers and were first to announce a customer running on the NVDA’s Blackwell platform.
Earnings Estimate Revisions Show Downward Trend for GOOGL
The Zacks Consensus Estimate for first-quarter 2025 earnings is pegged at $2.02 per share, down by a penny, indicating 6.88% year-over-year growth.
The consensus mark for 2025 earnings is pegged at $8.90 per share, down 3 cents over the past 30 days, suggesting 10.7% year-over-year growth.
The Value Score of C suggests a stretched valuation for Alphabet at this moment.
Alphabet stock is trading at a premium, with a forward 12-month Price/Sales of 6.83X compared with the industry’s 5.56X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
GOOGL shares are trading below the 50-day moving average but above the 200-day moving average, indicating a mixed trend.
GOOGL Shares Trade Below 50-Day, Above 200-Day SMA
Image Source: Zacks Investment Research
GOOGL Stock: Buy, Sell or Hold?
Alphabet’s growing GenAI capabilities and significant investments in cloud computing present a potential catalyst for the future amid stiff competition in the cloud space and increasing regulatory headwinds. GOOGL’s dominant position in the search engine market and strong position in the cloud are long-term drivers.
Alphabet is facing increasing regulatory headwinds and global scrutiny over its search dominance. Google’s alleged wrong practices constitute the utilization of Android to promote its own search engine unfairly. It is facing several lawsuits regarding data privacy, competition practices, AI usage, and copyright issues in several countries across the globe.
Image: Bigstock
Can GOOGL's Cloud Investments Push the Stock Higher in 2025?
Alphabet (GOOGL - Free Report) shares have returned 26.4% in the trailing 12-month period, outperforming the Zacks Computer & Technology sector and the Zacks Internet Services industry. Over the same timeframe, the sector and the industry have returned 20.7% and 23.7%, respectively.
However, GOOGL shares fell more than 9% since it reported fourth-quarter 2024 results, reflecting slowing Google Cloud revenues. In the reported quarter, Google Cloud revenues surged 30.1% year over year to $11.955 billion and accounted for 12.4% of the quarter’s total revenues. The figure lagged the Zacks Consensus Estimate by 1.51%.
Alphabet exited 2024 with an annual run rate of $110 billion for its Cloud and YouTube businesses. GOOGL now expects to invest roughly $75 billion in capital expenditures in 2025, which is aimed to build up technical infrastructure, primarily for servers followed by data centers and networking.
This is expected to help GOOGL compete with the likes of Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) in the cloud computing domain.
However, Alphabet is suffering from a lack of capacity and until new capacity comes online in 2025, cloud revenues are expected to see increased variability. This doesn’t bode well for investors and is expected to remain an overhang on the shares.
GOOGL Stock’s Performance
Image Source: Zacks Investment Research
Can Expanding AI Expertise Aid GOOGL’s Prospects?
Alphabet is leveraging Artificial Intelligence (AI) to attract new clients, win larger deals and deepen product adoption among existing customers.
GOOGL’s Gemini models, along with Generative AI (Gen AI) video and image generation models, Veo 2, and Imagen 2, are currently used by more than 4.4 billion developers across products and platforms.
GOOGL has been expanding its AI proficiency through the frequent update of its models. In December, Alphabet unveiled Gemini 2.0, its most capable model that powers AI agents.
Alphabet launched Gemini 2.0 flash, its workhorse model with low latency and enhanced performance. Earlier this year, Alphabet updated 2.0 Flash Thinking Experimental in Google AI Studio.
The company has made an updated 2.0 Flash available to all users of the Gemini app on desktop and mobile. Most recently, Alphabet made the updated Gemini 2.0 Flash generally available via the Gemini API in Google AI Studio and Vertex AI.
AI Improves Alphabet’s Search & Cloud Businesses
Alphabet’s seven AI-enabled products and platforms are currently used by more than 2 billion users. AI is powering Search with Gemini supporting AI overviews. Circle to Search is driving additional Search and is gaining popularity among younger users.
AI developer platform Vertex AI is gaining rapid adoption with five times increase in customers year-over-year in fourth-quarter 2024. Vertex usage increased 20 times during 2024, with strong developer adoption of Gemini Flash, Gemini 2.0, Imagen 3 and Veo.
Alphabet saw strong demand for Trillium, its sixth-generation TPU, which delivers four times better training performance and three times greater inference compared with the previous generation. In collaboration with NVIDIA (NVDA - Free Report) GOOGL delivered H200-based platforms to customers and were first to announce a customer running on the NVDA’s Blackwell platform.
Earnings Estimate Revisions Show Downward Trend for GOOGL
The Zacks Consensus Estimate for first-quarter 2025 earnings is pegged at $2.02 per share, down by a penny, indicating 6.88% year-over-year growth.
The consensus mark for 2025 earnings is pegged at $8.90 per share, down 3 cents over the past 30 days, suggesting 10.7% year-over-year growth.
Alphabet Inc. Price and Consensus
Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote
Alphabet’s earnings beat the Zacks Consensus Estimate in all the trailing four quarters, the average surprise being 11.57%.
Find the latest EPS estimates and surprises on Zacks Earnings Calendar.
GOOGL Stock is Overvalued
The Value Score of C suggests a stretched valuation for Alphabet at this moment.
Alphabet stock is trading at a premium, with a forward 12-month Price/Sales of 6.83X compared with the industry’s 5.56X.
Price/Sales Ratio (F12M)
Image Source: Zacks Investment Research
GOOGL shares are trading below the 50-day moving average but above the 200-day moving average, indicating a mixed trend.
GOOGL Shares Trade Below 50-Day, Above 200-Day SMA
Image Source: Zacks Investment Research
GOOGL Stock: Buy, Sell or Hold?
Alphabet’s growing GenAI capabilities and significant investments in cloud computing present a potential catalyst for the future amid stiff competition in the cloud space and increasing regulatory headwinds. GOOGL’s dominant position in the search engine market and strong position in the cloud are long-term drivers.
Alphabet is facing increasing regulatory headwinds and global scrutiny over its search dominance. Google’s alleged wrong practices constitute the utilization of Android to promote its own search engine unfairly. It is facing several lawsuits regarding data privacy, competition practices, AI usage, and copyright issues in several countries across the globe.
Alphabet currently has a Zacks Rank #3 (Hold), suggesting that it may be wise to wait for a more favorable entry point in the stock. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.