Is Alphabet (GOOGL) Stock a Buy Before Earnings Wednesday?

TLDR

• Alphabet reports Q4 2025 earnings on February 4, with Wall Street expecting EPS of $2.64 (up 23% year-over-year) and revenue of $111.3 billion (up 15.4%)
• Advertising revenue remains critical, with investors watching for signs of strength in Search and YouTube, plus details on AI-powered search monetization plans
• Google Cloud margins hit 23.7% in Q3, showing a major turnaround from losses in 2019 to solid profitability by 2025
• AI spending takes center stage as Alphabet invests $91-93 billion in 2025 with even higher spending planned for 2026 to maintain competitive edge
• Analysts maintain Strong Buy rating with average price target of $352.46, representing 4.3% upside potential from current levels

Alphabet drops its Q4 2025 earnings on February 4, and investors are zeroing in on three numbers that could make or break the stock’s next move. Wall Street expects earnings per share of $2.64, marking a 23% jump from last year. Revenue should climb 15.4% to $111.3 billion.

Alphabet Inc., GOOGL

The stakes are high. With AI spending reaching unprecedented levels and competition heating up, this earnings report could set the tone for months to come.

Advertising Revenue Takes the Spotlight

Google’s advertising business still brings in the bulk of revenue. Investors want concrete answers about whether ad sales are accelerating or cooling down. Search and YouTube performance will be under the microscope.

Competition from OpenAI has raised questions. Some worry that generative AI apps could chip away at Google’s search dominance. But the fourth quarter typically delivers strong advertising numbers, so expectations remain high for Search revenue.

Management commentary on AI-powered search ads matters too. Investors want to know how Google plans to turn generative AI into actual dollars. The good news? This advertising cash machine funds Google’s investments in Cloud, AI search, and moonshot projects like Waymo.

Google Cloud Profitability Becomes Critical

Revenue growth is one thing. Profit margins tell the real story. Google Cloud hit a 23.7% operating margin in Q3 2025. That’s a massive shift from the deep losses the business posted back in 2019.

The cloud business now contributes real profits. Heavy AI spending could either validate these investments or squeeze margins further. Investors need to see if all that infrastructure spending is paying off.

Stifel analyst Mark Kelley raised his price target to $346 from $333. He expects both Search and Cloud results to beat Wall Street estimates. The momentum looks solid, but the numbers need to back it up.

Google Cloud backlog surged 82% to $155 billion at the end of Q3. Morgan Stanley projects 2025 Cloud revenue around $58 billion. For 2026, the base case calls for 44% year-over-year growth, with a bull case scenario hitting 50% if major cloud deals close.

AI Spending Reaches New Heights

Alphabet’s AI investments have never been more important. The company plans to spend $91 billion to $93 billion in 2025, with even bigger numbers coming in 2026. This spending could fuel another year of strong growth or create near-term pressure on cash flow.

Google’s proprietary ecosystem gives it an edge. Search alone provides a competitive moat that rivals struggle to match. But investors watched Meta and Microsoft report Q4 results last week, and the reactions were telling.

Meta won over investors with plans to spend $115 billion to $135 billion on AI this year. That’s nearly double its 2025 spending. Microsoft shares dropped after higher AI costs raised profitability concerns.

Alphabet’s AI investments span data centers and infrastructure. The question is whether these massive outlays can deliver another year of strong performance while maintaining profit margins.

AI Mode, Google’s conversational search assistant, already has over 75 million daily active users. The feature rolled out across 40 languages rapidly. AI Overviews are expanding search usage, particularly among younger users who rely on them for quick answers.

Google also launched AI Max in September 2025. The tool helps advertisers find the most relevant ad surfaces and discover new targeting opportunities. These features could translate into higher conversion rates and fresh revenue streams.

The Gemini large language models are gaining traction. Apple signed a multiyear deal to use Gemini in the revamped Siri assistant launching in late 2026. That creates a new licensing revenue stream from Apple’s 2 billion device installed base.

YouTube continues to dominate streaming based on watch time. The platform signed a multiyear content deal with BBC, expanding distribution and strengthening its global position. YouTube also broadcast live NFL games, drawing more than 19 million viewers in September 2025.

Alphabet holds roughly $98.5 billion in cash at the end of Q3. The company trades at 30 times forward earnings, which looks expensive. But the diversified revenue streams across Search, Cloud, YouTube subscriptions, and emerging AI monetization might justify the premium.

A federal judge ruled in January 2026 that Google must face a consumer antitrust lawsuit over alleged search market dominance. Legal risks remain on the radar, but the core businesses keep performing.

Analysts maintain a Strong Buy rating on GOOGL stock based on 23 Buys and six Holds. The average price target sits at $352.46, implying 4.3% upside from current levels.

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