This Hated Mag 7 Stock Crushed Earnings

By Corbin Buff, Financial Writer and Stock Researcher

July 31, 2025 5:47 AM UTC

If you’ve listened to the AI doomsayers over the last year, you’ve probably heard that Google Search is finished. ChatGPT is replacing it. Younger users are fleeing. Alphabet’s (NASDAQ: GOOGL) moat is eroding.

But if you actually read the Q2 earnings? The data tells a very different story.

Search is not only alive … It's accelerating. And Alphabet has a rating of B or “Buy” according to our Zen Ratings system. Let’s take a look under the hood at what’s actually going on with this company.

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The Numbers Don’t Lie

Alphabet just posted double-digit growth across every major business line:

Search revenue up 11.7% YoY … and accelerating from Q1
YouTube ad revenue up 13%
Google Cloud up 31%, with margin expansion to 20.7%
Subscription revenue up 20% (includes YouTube Premium, etc.)

Search, YouTube, Cloud, and Subscriptions now make up the vast majority of Alphabet’s revenue, and together they grew 15.6% YoY.

Search Volume Is Growing, Not Shrinking

Bears have argued that search might be temporarily propped up by higher ad loads.

But that’s not the case:

Google reported strong expansion in query volume
AI-powered features like Overviews, Circle to Search, and Lens are increasing search usage, not cannibalizing it
Where AI Overviews are rolled out, queries increase 10% on average

With over 100 million users already engaging with AI-powered search in the U.S. and India, Google is proving that AI enhances user behavior … it doesn’t replace it.

Google Cloud Is Quietly Booming

One of the most underappreciated parts of Alphabet’s business is Google Cloud.

Q2 showed:

Revenue up 32% YoY
Operating margin at 20.7%, continuing to climb
$106B in backlog, up 38%
Multiple $1B+ deals signed in just the first half of the year
Over 85,000 new enterprise customers, many for Gemini-powered AI tools

Alphabet is ramping up CapEx in response to demand, not weakness. Cloud is now a high-margin, cash-generating engine.

YouTube: More Than Just a Streaming Platform

YouTube continues to dominate:

13% YoY ad growth
200M+ daily Shorts viewers
YouTube now leads U.S. streaming by watch time, beating out Netflix (NASDAQ: NFLX)
100M+ Premium subscribers
AI tools are expanding content reach (e.g. automatic translation and dubbing)

Zen Rating: B (Buy)

Alphabet is B-rated in our system and sits at the core of multiple secular growth stories:

AI adoption
Cloud infrastructure
Search monetization
Digital media and streaming
Autonomous vehicles

It also has zero sell or strong sell ratings accorded to top Wall Street analysts we track, making it a Strong Buy according to analyst ratings:

Get the current analyst forecasts

The stock has been a bit of a laggard compared to some other big tech peers, but that may be starting to turn around with the stock now scoring a B in our Momentum Component Grade. We track how frequently shares are traded, volume-weighted momentum, and even adjust our momentum metrics based on the stock's risk profile. In fact, our momentum model includes over 22 different factors.

Alphabet also scores B ratings in Financials, AI, and more. Click here to see its full breakdown.

Despite all that, GOOGL still trades at a discount to other Big Tech names on forward earnings and FCF yield … it’s currently at a PE ratio of around 20x.

Bottom Line

AI isn’t killing Google … It's accelerating it.

The haters were wrong. Search isn’t eroding; it’s growing. And at today’s valuation, GOOGL may offer one of the most attractive large-cap risk/rewards in tech.

👉 See the full stock breakdown and valuation

👉 Get the current analyst forecasts

What to Do Next?

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