Alphabet earnings preview: Fiscal Q2 2025

Earnings preview

Alphabet Q2 expectations

Coming into the Q2 2025 earnings next week, Alphabet Inc. (NASDAQ:  GOOGL) total revenues expectations of $94 billion for the quarter have remained stable since February. However, operating profit and EPS have been grinding higher recently, due to the continued expected strength of the cloud business. We have been closely monitoring the trend of the Cloud business.

We have been closely monitoring the trend of the Cloud business. Consensus is estimating Q2 Cloud revenue of $13.1 billion, flat since February 2025. The operating profit margin has been trending better and has increased from 15.9% in February 2025 to 17.0%, up 110bps. However, the debate on the Cloud margin continues. For Q2, estimates for operating profit margin range from 11% to 20% for the Google Cloud business and have widened recently.

The outlook

Expected Q2 total revenue of $94.0 billion has edged back close to $94.1 billion levels in February 2025, but EPS has moved up slightly from $2.14 to $2.17. Q2 Revenue expectations Search at $52.9 billion and YouTube at $ 9.6 billion have been stable all year. The Services operating profit expectation, too, has not changed much all year. There has been some discussion in the market that ChatGPT may be taking share from Alphabet’s Search business. This is currently not showing up in the numbers, but we will be listening for commentary around this issue in the earnings call.

In contrast to the expected stability of the Services profitability, the Cloud margin consensus estimates for Q2 and H2 2025 have moved higher since February. The guidance and commentary around the Cloud business will be an important dimension to the earnings call this quarter.

For FY 2025, the Cloud business is projected to generate revenue of $54.8 billion and an operating profit margin of 17.8%, up from a 16.5% margin expectation in February. For FY 2026, the Cloud margin increased by 180bps from 18.1% to 19.9%. 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 21.1% margin, up almost 200bps since February 2025.

Alphabet stock has traded up 14.9% since last quarter’s release and is up 34.4% from January 2024. It is worth noting that the stock has been down 10.3% since February 2025. Visible Alpha consensus target price is $201, up 8.6% from current levels.