Alphabet Rebounds After Strong Earnings and Buyback Announcement

Finally, some good news for shares of Alphabet (NASDAQ: GOOGL), Google's parent company. After a turbulent start to 2025, the stock has gained momentum following a strong earnings report, a dividend increase, and the authorization of a massive buyback program.

However, Alphabet faced several headwinds leading up to its earnings. The stock had fallen roughly 27% from its 52-week high and was down about 20% year-to-date. The decline was fueled by a risk-off environment that hammered tech stocks, growing concerns about the threat from AI-based search competitors like OpenAI’s ChatGPT and XAI’s Grok, as well as regulatory challenges.

Notably, a federal judge recently ruled that Google operated an illegal monopoly in the online advertising market, marking the second time in eight months that the company was labeled an unlawful monopolist under the Sherman Antitrust Act. The ruling could eventually force Alphabet to divest parts of its ad-tech business, although the company has already announced its intention to appeal.

Despite these pressures, a compelling bull case for Alphabet existed ahead of its earnings. Its valuation had become compressed, reaching historically low earnings multiples, while its core businesses continued to show growth and resilience. Investors willing to look past the short-term noise saw an opportunity, and Alphabet did not disappoint.

Alphabet Tops Earnings, Announces $70 Billion Buyback

Alphabet reported strong first-quarter 2025 earnings on April 24, surpassing expectations across the board. Revenue reached $90.23 billion, a 12% increase year-over-year, beating estimates of $89.12 billion. Earnings per share came in at $2.81, crushing the $2.01 consensus estimate by nearly 40%.

Google’s core search business generated $50.7 billion in revenue, a 9.8% increase, bolstered by AI-driven features such as AI Overviews, which now have 1.5 billion monthly users. This data point should reassure investors who are concerned about Alphabet’s ability to fend off rising competition in AI search.

YouTube advertising revenue was $8.93 billion, just shy of the $8.94 billion forecast, while overall advertising revenue rose 8.5% to $66.89 billion. Meanwhile, Google Cloud reported $12.26 billion in revenue, up 28% year-over-year. This slightly missed the consensus of $12.27 billion but delivered improved margins of 17.8%.

Alphabet also announced a $70 billion share buyback and increased its quarterly dividend by 5% to 21 cents per share. Capital expenditures surged 43% to $17.2 billion, reflecting the company’s heavy investments into AI infrastructure, but Alphabet reaffirmed its $75 billion full-year capex guidance. Following the report, shares jumped nearly 5% in after-hours trading, adding roughly $75 billion to its valuation.

Analysts See Further Upside for GOOGL

The strong earnings performance has reignited optimism among analysts. Of the 40 analysts covering Alphabet, the stock carries a consensus Moderate Buy rating and a new average price target of $198.63, implying about 23% upside from current levels.

Bank of America analysts maintained their Buy rating and raised their price target from $185 to $200 following the release of the report. They highlighted Alphabet’s strong performance in Search and Cloud, the positive impact of AI features like AI Overviews, and robust traction for its Gemini large language model (LLM).

BofA also boosted its 2025 estimates, citing solid ad spending trends and potential upside from AI-driven monetization, even as they expect slower growth in Q2 due to tougher year-over-year comparisons.

Similarly, Citigroup analysts reiterated their Buy rating and increased their price target from $195 to $200. They praised Alphabet’s resilience in Search advertising, strengthened by AI tools such as AI Overviews, which now serve over 1.5 billion users monthly. While they acknowledged macroeconomic uncertainties, Citigroup expressed confidence in Alphabet’s ability to sustain Search growth and leverage AI advancements to drive further revenue opportunities, particularly through Gemini.

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