Alphabet shares rise as AI and search boost quarterly revenue and profit

Alphabet reports $34.5bn in Q1 profit as AI-driven cloud growth and stable search advertising exceed Wall Street expectations.

A view of Google's headquarters in Mountain View, California, on April 23, 2025. Alphabet Inc. is set to report its earnings on April 24. Photo by David Paul Morris/Bloomberg

By Anna Fadiah and Hayu Andini

Alphabet shares rose more than 4% in after-hours trading on Thursday after the parent company of Google delivered stronger-than-expected results for the first quarter of 2025. The rise came as Alphabet posted a 12% year-over-year increase in revenue to $90.2 billion and a 46% jump in net income to $34.5 billion. The focus keyphrase Alphabet shares rise summarizes investor optimism following these earnings, which also defied mounting concerns over trade tensions and recession risks.

The performance was driven by robust growth in Google’s core search and advertising businesses, as well as surging demand for artificial intelligence infrastructure and services through its cloud division. The strong results helped reassure investors worried about how emerging technologies such as generative AI might disrupt Google’s dominant search model.

Search remains strong amid AI competition

Google Search, the company’s largest revenue stream, brought in $50.7 billion in the first quarter, growing nearly 10% year over year. This exceeded analysts’ expectations, which had anticipated growth closer to 8%. The continued strength of the search business is especially notable in a year marked by increasing consumer adoption of AI chatbots like OpenAI’s ChatGPT, Anthropic’s Claude, and Elon Musk’s Grok.

Concerns had been rising that users might bypass traditional search engines in favor of generative AI interfaces, threatening Google’s longstanding advertising-based revenue model. In response, Google has incorporated its own generative AI features into search results through a tool known as AI Overviews.

“Search saw continued strong growth, boosted by the engagement we’re seeing with features like AI Overviews,” said Sundar Pichai, Alphabet’s CEO. “We’re leaning in heavily here, continuing to roll the feature out in new countries, to more users and to more queries.”

According to Philipp Schindler, Alphabet’s chief business officer, AI Overviews are being monetized at “approximately the same rate” as traditional search links. While exact click-through rates were not disclosed, the statement helped alleviate fears that these AI summaries might cannibalize ad revenue.

AI drives cloud growth and infrastructure investment

Alphabet’s cloud division also posted impressive gains, with revenue climbing 28% year over year to $12.3 billion. The growth reflects a broader boom in demand for AI-related cloud services, including data storage and machine learning capabilities. However, the pace of growth slightly slowed compared to the previous quarter’s 30.1%, which Alphabet attributed to supply constraints amid soaring demand.

To meet this demand, Alphabet significantly increased its capital expenditure, investing $17.2 billion in Q1 alone, up from $12 billion in the same period last year. The company now expects full-year capital expenditures to reach $75 billion, up from $53 billion in 2024. Spending is focused on AI infrastructure such as custom chips, data centers, and high-speed networking gear.

Despite concerns about Big Tech’s combined $300 billion spending spree in 2025, Alphabet’s strategic investments appear to be paying off. Analysts point out that the cloud division’s consistent growth, combined with stable monetization in search, strengthens the company’s long-term position in AI and advertising.

Share buybacks and unexpected gains lift investor sentiment

In addition to beating earnings expectations, Alphabet announced a $70 billion share repurchase program, matching last year’s buyback plans. This move further boosted investor confidence, especially at a time when other tech companies have been more conservative with capital returns.

A one-time $8 billion gain related to private company shares also contributed to the quarter’s net income increase, although Alphabet did not name the company involved.

Jefferies analyst Brent Thill praised the overall report, calling the results “better than feared” and citing “healthy ads and cloud” as core strengths. He had previously warned that macroeconomic uncertainty and rising tariffs could weigh on ad spending, particularly from Chinese retailers.

Trade policy changes impact ad spending

Alphabet’s solid earnings came despite new U.S. trade policies that are already starting to impact its advertising business. The White House recently ended the exemption on small overseas packages under $800, a move that has forced Chinese e-commerce platforms such as Temu and Shein to drastically cut their ad budgets on platforms like Google and Meta.

Schindler acknowledged the policy’s effect, stating it “will cause a slight headwind to our ads business in 2025, primarily from Asian-based retailers.” This follows a similar warning earlier in the week from Tesla, which said increased tariffs would have an “outsized” impact on its battery supply chain.

Alphabet is the second major tech company to report earnings amid the broader backdrop of escalating trade tensions. The company’s stock had fallen about 17% earlier this year, partly due to investor concerns about how tariffs and slower global consumer demand might affect revenue.

“We’re obviously not immune to the macro environment,” Schindler said, signaling that while Alphabet remains strong, challenges lie ahead.

Legal and regulatory challenges remain

While Alphabet’s Q1 earnings brought good news on the financial front, the company continues to face serious regulatory threats. It is currently battling several antitrust cases in the U.S., which could force significant changes to its business operations.

Potential remedies include breaking up parts of the company—such as divesting its Chrome browser—ending exclusive search deals with partners like Apple, and opening more of its data to competitors. Such outcomes could reshape how Google operates and generate revenue in future quarters.

Looking ahead: Can growth be sustained?

As the tech sector braces for potential economic turbulence and shifting global policies, Alphabet’s performance in the first quarter of 2025 suggests that it is better positioned than many of its peers. Its strong foundation in search, early leadership in AI infrastructure, and smart integration of AI into its core products provide multiple avenues for sustained growth.

Yet, with the competitive landscape evolving rapidly and regulatory pressures mounting, Alphabet must continue to innovate while managing risk. For now, the strong earnings have quieted some doubts—and as Alphabet shares rise, so too does investor confidence in the company’s strategic direction.