This Hated Mag 7 Stock Crushed Earnings

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

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