Alphabet earnings preview: Fiscal Q1 2025

Earnings preview

Alphabet Q1 expectations

Coming into the Q1 FY 2025 earnings next week, Alphabet’s (NASDAQ: GOOGL) overall expectations for the quarter have remained stable since February. For Q1 2025, Management called out the impact of a strong dollar and leap year. Expected Q1 revenue of $89 billion and EPS of $2.00 have been stable since last fall.

We have been closely monitoring the trend of the Cloud business. Consensus is estimating Q1 Cloud revenue of $12.3 billion, up from $11.9 billion in Q4. The operating profit margin has been trending better. However, the debate on the Cloud margin continues with consensus expecting 15.4%, up 30 bps from February. For Q1, estimates for operating profit margin range from 10% to 19% for the Google Cloud business.

The outlook

Expected Q2 total revenue of $93.6 billion has edged down a bit from $94.1 billion levels in February 2025, but EPS of $2.14 has been stable. The Cloud margin consensus expectations from Q2 throughout the rest of FY 2025 have moved notably higher. The guidance and commentary around the Cloud business and the outlook for its estimated capex spend will be an important dimension to the earnings call this quarter.  

For FY 2025, the Cloud business is projected to generate revenue of $55 billion and an operating profit margin of over 17%, up from a 16.5% margin expectation prior to the earnings release. For FY 2025, the Cloud margin increased by 90bps from 16.5% to 17.4%. Questions remain about both the revenue growth and profitability of the Cloud business and if the cloud margin will continue its expansion over the next few years. By the end of FY 2027, the consensus Cloud margin is estimated to generate a 21.3% margin, up 200bps since February 2025. 

CapEx has continued to increase reflecting investment in servers, data centers, and networking equipment. For 2025, the company guided CapEx to be $75 billion, up from $52.5 billion in FY 2024, an increase of over $20 billion year-over-year and significantly ahead of the $58.7 billion consensus at the time.

Alphabet stock has traded down 24.3% since last quarter’s release and 13.5% from January 2024, slightly outperforming the S&P 500’s return.