Google posts $30.6B operating income, beats estimates as AI and cloud investment accelerates
Apr 25, 2025
Key Points
- Alphabet's operating income of $30.6 billion beat Wall Street estimates by $1.9 billion, with stock jumping 5% in after-hours trading despite a year of flat performance.
- Google is deploying record capital expenditures of $17.2 billion this quarter toward AI infrastructure, on track for a $75 billion full-year capex plan more than double its historical average.
- Advertising revenue grew 8% year-over-year to $66 billion, signaling Google's search dominance has withstood competition from ChatGPT and other AI alternatives that investors feared would disrupt the core business.
Summary
Alphabet reported $30.6 billion in operating income for Q1, beating Wall Street's estimate of $28.7 billion. The stock rose 5% in after-hours trading, adding roughly $50 billion to market value. Revenue held steady across business units, though growth rates decelerated from Q4.
Capital expenditures hit a record $17.2 billion in the quarter as Google accelerates spending on AI infrastructure. The company is committing to $75 billion in capex for the full year, more than double its five-year annual average. This signals aggressive confidence in its AI roadmap despite macroeconomic uncertainty around tariffs and trade policy.
Advertising revenue rose 8% year-over-year to $66 billion, marking a deceleration from Q4. Cloud revenue jumped 28% to $12.3 billion, also a pullback from recent quarters. The market had braced for worse. Alphabet's stock had been flat over the past 12 months as investors worried about OpenAI and Perplexity disrupting search, plus fallout from two federal antitrust losses that could force a company breakup. Earnings suggest those concerns haven't yet dented the core business. Google's search dominance appears intact, with people continuing to use Google Search rather than switching wholesale to ChatGPT or other alternatives.
Alphabet trades at the lowest multiple among major tech giants at 18 times forward earnings, compared to Microsoft at 28 times. The market is pricing in significant risk to the core business model, even as Google's absolute profitability continues to climb. The company raised its quarterly dividend 5% to 21 cents per share, a year after initiating the payout. The move addresses long-standing criticism that Google was holding excess cash.
Google's chief business officer declined to comment on how tariffs might affect second-quarter results, citing early uncertainty. Google has less direct exposure to Chinese tariffs than Apple, since it doesn't manufacture consumer devices at scale. It remains exposed through supply chains on hardware like Google Home devices and Android phones.