Alphabet’s Q3 Report: AI Boosts Google Search and Cloud, But Is It Enough?

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As the calendar pages of October swiftly turn, Wall Street braces for what promises to be a nail-biting end to the month. The tech giants, those gargantuan forces of the digital world, are set to report their quarterly results. Investors, already jittery from the sheer volume of data, will be particularly fixated on one thing: artificial intelligence (AI). It’s the hottest ticket in town right now, with a swirl of promise and the occasional whiff of danger. And, among all the tech titans, one name stands out-Alphabet (GOOG) (GOOGL). Alphabet, with its sprawling empire that spans from search engines to cloud computing, is scheduled to release its third-quarter results on October 29. It’s a date that investors might want to circle in their calendars, perhaps with a very thick red pen.

Why the buzz? Well, Alphabet’s Google Search and Google Cloud businesses, which have long been cash cows, are increasingly bolstered by AI. And, as any seasoned Wall Street analyst will tell you, AI isn’t just a buzzword anymore. It’s driving revenue growth in a way few could have predicted. Alphabet’s Q3 results might just serve as a catalyst for its stock, which remains curiously affordable compared to its peers.

AI: The Unlikely Superpower of Google Search

a family of large language models (LLMs) designed to go toe-to-toe with the best in the business. These LLMs power not only a chatbot (aptly named Gemini) but also a new feature on Google Search-AI Overviews. These Overviews are, in essence, a fusion of text, images, and links to third-party sources that serve up direct answers to search queries.

And here’s the clever bit: AI Overviews are positioned above traditional search results, meaning you don’t have to scroll endlessly through irrelevant pages of information. Alphabet claims that these Overviews are attracting advertising dollars at a rate comparable to standard Google Search ads. And here’s where it gets really interesting: More than 2 billion people are using these Overviews every month. It’s like being at a party and discovering that everyone is suddenly listening to the same song you’ve been quietly humming for years.

In the second quarter of 2025, Google Search raked in a whopping $54.2 billion in revenue, marking an 11.7% increase compared to the previous year. This surge in growth is all the more impressive when you consider that, just three months earlier, the growth rate was a comparatively modest 9.7%. So, the question on everyone’s mind now is: Did that momentum carry into Q3? Alphabet’s October 29 earnings report might just answer that very question.

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Google Cloud: A Quiet Powerhouse in Alphabet’s AI Strategy

While Google Search generates the lion’s share of Alphabet’s revenue, Google Cloud has increasingly become the unsung hero of the company’s AI ambitions. The cloud platform is a top destination for businesses seeking to build and deploy AI applications. In fact, Alphabet proudly claims that nearly every AI unicorn-those scrappy startups valued at over a billion dollars-uses Google Cloud to fuel their software dreams.

Google Cloud doesn’t just provide storage; it offers the backbone for cutting-edge AI development. The platform operates hundreds of data centers brimming with high-performance GPUs (graphics processing units) from leading manufacturers like Nvidia. But Google doesn’t just buy off-the-shelf solutions; it also designs its own chips, thereby offering customers a little something extra-more computing power to help fuel the AI revolution.

And, of course, the company offers developers access to an ever-expanding library of ready-made LLMs from third parties to supercharge their projects. But here’s the twist: Over 85,000 organizations have chosen to use Alphabet’s very own Gemini models to power their AI software. It’s as if everyone’s gone to the same party-and now they’re all choosing the same dance partner.

In the second quarter of 2025, Google Cloud generated a record $13.6 billion in revenue, reflecting an impressive 32% year-over-year growth. That marked an acceleration from the previous quarter’s 28% growth. And, considering the $106 billion order backlog Alphabet reported at the end of Q2, it’s clear that demand for Google Cloud services is growing faster than Alphabet can keep up with. That backlog grew by an eye-watering 38%, suggesting that Alphabet is sitting on a veritable gold mine of unmet demand.

Alphabet: A Stock That Might Be Too Good to Pass Up

So, what does this all mean for Alphabet’s stock? Well, the rapidly accelerating growth in both Google Search and Google Cloud has driven a surge in profitability. In fact, Alphabet reported earnings of $5.12 per share for the first half of 2025, up 35% from the same period last year. The company’s trailing 12-month earnings of $9.39 per share put its stock at a price-to-earnings (P/E) ratio of just 25.6. That’s quite low for a company that’s leading the charge in the AI space-making Alphabet one of the most undervalued stocks among the so-called “Magnificent Seven” tech giants.

So, if you’re an investor with an eye on Alphabet’s stock, now might be a good time to take a closer look. But, as with all investments, it’s important to remember that the AI race isn’t a sprint-it’s more like a marathon, and one that’s likely to stretch out over the next three to five years. Patience, as they say, is a virtue.

Will Alphabet’s stock continue to climb after its October 29 earnings report? Only time will tell, but one thing’s for certain: The future of AI looks very bright, and Alphabet seems to be in the driver’s seat.

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2025-10-16 11:23