Google Cloud, AI, ads, Waymo, and more: Google earnings takeaways

Google’s parent company, Alphabet (GOOGL), was a big winner on Wall Street this week, delivering first-quarter earnings that largely surpassed expectations — and highlighted momentum across its search, cloud, and AI businesses. The report sent investors a strong signal that the company is weathering macroeconomic headwinds with diversified growth and continued strength in its core businesses.

Fueled by growth in cloud services and AI, Alphabet posted a net income of $34.5 billion on $90.2 billion in revenue — a 12% year-over-year increase that beat Wall Street’s estimate of $89.2 billion. The company also reported earnings per share of $2.81; analysts were expecting that number to be $2.01. Net income increased 46%.

The company also announced a $70 billion stock-buyback program and said it will increase its quarterly cash dividend by 5% to $0.21.

The stock popped in after-hours trading and continued to rise Friday — 1.6% around midday — buoyed by better than-expected revenue, margin expansion, and bullish sentiment from analysts who noted broad-based strength and Google’s early success in monetizing its AI tools.

“We are so back,” Wedbush analysts said about Alphabet’s earnings.

Search, ads, and AI all in sync

Google Search continues to be Alphabet’s revenue anchor. It’s the company’s largest ad segment, and its revenue grew almost 10% year over year to $50.7 billion, slightly ahead of the Street’s estimates.

Part of that engagement is being driven by Google’s generative AI Overviews tool, which is bolted atop the company’s search results, making it virtually unavoidable. CEO Sundar Pichai said AI Overviews “now has 1.5 billion users per month” and expanded in the first quarter to more than 15 languages across 140 countries. The company also launched “AI mode” in March for more complex queries, which Google said has received positive user feedback.

According to William Blair analysts, Alphabet is in a “good, positive cycle for search with AI,” with strong engagement trends and growing traction from new tools.

While investors had been wary about whether AI-driven search results would be less profitable than traditional search results, chief business officer Philipp Schindler said on the earnings call that the company is monetizing AI Overviews “at approximately the same rate.”

Schindler also said that AI is helping Google’s ad business better match ads to searches — letting marketers “reach customers and searches where we would not previously have shown their ads.” The company’s ad revenue was $66.8 billion (versus an expected $66.4 billion).

William Blair noted that “this quarter is the largest expansion for AI overviews, with new users and more responses,” and said advertisers using demand-generation tools — a key driver of AI-powered ad personalization — are seeing a 26% year-over-year boost in conversions.

Wedbush analysts were similarly upbeat, noting that “advertising trends were healthy to start the year.” They pointed out that first-quarter Google Search revenue growth exceeded consensus by roughly 40 basis points and that the company didn’t call out any signs of softening ad backdrop, “likely tempering some investor concern in the near-term.”

Morningstar analysts said they were particularly impressed with the “wide range of monetization angles the firm is creating by leveraging AI, including Google Cloud, Gemini, AI Overviews, and improved ad targeting tools provided to advertisers.”

On the earnings call, Pichai highlighted the company’s recently released Gemini 2.5 AI model, which he called “an extraordinary foundation for our future innovation” in the report. The updated model, integrated across Google products and Google Cloud, is powering features such as AI Overviews and advanced developer tools. While Gemini’s user count has grown substantially, it still lags behind OpenAI’s ChatGPT and Meta AI (META).

Cloud keeps growing

Google Cloud remained one of the fastest-growing — and most important — segments in Alphabet’s portfolio.

Google Cloud now holds the third-largest market share in the global cloud infrastructure space, behind Amazon Web Services (AMZN) and Microsoft Azure (MSFT). But Google’s cloud services growth seems to be outpacing the rest of the sector.

Revenue reached $12.3 billion, up 28% year over year, just about matching analysts’ expectations. The segment’s profitability improved significantly, and operating income was up 142%. Those numbers were driven by strong growth across both core and AI-specific products.

The company said demand continues to outpace capacity, reinforcing the need for continuing infrastructure investment. Alongside Thursday’s earnings, the company reiterated plans to invest approximately $75 billion in capital expenditures in 2025, much of that dedicated to AI infrastructure and data centers to support workloads.

Wedbush called Cloud’s revenue growth “encouraging” and noted that “the more aggressive pace of investment should alleviate capacity constraints as AI demand continues to scale.”

Waymo is still ramping up

Alphabet’s autonomous driving company, Waymo, also had a big quarter. The company said it’s providing 250,000 paid robotaxi rides a week — five times what it did a year ago — and has expanded operations across San Francisco, Phoenix, Los Angeles, and Austin. Further launches in Atlanta, Miami, and Washington, D.C. are planned.

At the moment, Waymo remains a small contributor to Alphabet’s bottom line, but it’s drawing increased investor interest.

“This is probably the first question I’ve got on an earnings call on Waymo,” Pichai joked in a Q&A session after the quarterly earnings report was released. “It’s a sign of progress.”

He then suggested that Waymo’s self-driving robotaxis might be available for purchase — but didn’t offer a timeline or any detail beyond saying “there is future optionality for personal ownership.”

Headwinds ahead

Despite the strong quarter, Google faces big regulatory risks, which the company didn’t comment on during its earnings call.

Two antitrust cases — that have both already been decided in the government’s favor — are entering the remedy phase of their trials, with potential outcomes ranging from enforced data sharing to a company breakup.

The search engine giant was back in court this week, related to a ruling that found the company has an illegal monopoly in online search — in part by paying web browsers and smartphone manufacturers to feature its search engine. And the DOJ told the judge it had an eyebrow-raising solution: forcing the company to sell its popular Chrome browser.

In a separate antitrust case, a federal judge ruled that the company had illegally maintained a monopoly in some of its online advertising technology, which could result in regulatory fines or structural changes to how Google’s ad business operates — and maybe even a break-up.

And Japan’s FTC recently sent the company a cease-and-desist order after it said Google’s search practices were monopolistic.

Alphabet also acknowledged that changes to the U.S.’ “de minimis” trade exemption could pressure the company’s ads business, primarily among Asia Pacific-based retailers such as Temu and Shein.

Google executives said it’s still too soon to determine the full effects of the current macroeconomic volatility — but said there could definitely be signs of weakness in an area of spending that had been robust until recently.

“I mean, we’re obviously not immune to the macro environment, but we wouldn’t want to speculate about potential impacts beyond noting that the changes to the de minimis exemption will obviously cause slight headwind to our ads business in 2025, primarily from APAC-based retailers,” chief business officer Schindler said on the earnings call.

He added that Google is well-versed in navigating periods of uncertainty.

Alphabet has traditionally chosen not to provide specific forecasts for revenue or earnings. When chief financial officer Anat Ashkenazi made a presentation three months ago, she didn’t mention the looming trade war or macroeconomic uncertainty — she didn’t mention them on Thursday’s call, either.

Investors’ takes

Wedbush moved its consolidated estimates higher — second-quarter revenue of $91.9 billion (up 8.5% year over year) and 2025 operating income of $123.2 billion, up 4% from the firm’s prior forecasts. Its 2025 revenue estimate now stands at $383.1 billion, up 9.5% year over year and up 2% from its previous estimate.

“While we remain cautious across the group, we are incrementally constructive on the potential outcomes for this year,” analysts wrote. They also said they see “a case for multiple expansion in the coming quarters.”