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Alphabet Q1 2025 Earnings Preview: Should You Buy Before or After the Report?

Alphabet (GOOGL) is set to report its first-quarter financial results after the market closes on April 24th, 2025. And as usual, investors are asking a very familiar question: Should I buy the stock before earnings, or wait until after the numbers are out?

That’s exactly what I’ll be breaking down in this article. I’ll walk you through the key areas investors should be focused on heading into this report, including Google Search, Google Cloud, AI investments, and regulatory risks. I’ll also share my proprietary discounted cash flow model to help determine if Alphabet is undervalued right now — and by how much.

Looking Back at Q4: Alphabet Delivered Strong Results

Alphabet’s Q4 2024 report was a strong one by nearly every metric. The company posted $96.5 billion in revenue, up 12% year-over-year from $86.3 billion. That revenue growth was accompanied by a healthy expansion in profitability — with operating margins climbing from 27% to 32%.

Operating income surged by over $7 billion, reaching $30.9 billion — a clear sign that Alphabet’s scale is driving efficient earnings growth.

This level of operating leverage is something I always watch for in large-cap tech companies. When revenue grows and margins expand at the same time, that’s a sign of a business firing on all cylinders. Alphabet certainly looked like that in Q4.

Legal Risks: A Cloud That Hasn't Yet Rained

Now, I know many investors are closely following the ongoing legal battles Alphabet is facing. Governments and regulators — both in the U.S. and abroad — continue to sue Alphabet on antitrust grounds, arguing the company operates monopolies across its core business segments.

These are real risks, and the outcomes are unpredictable. But I’ve personally been following these legal proceedings closely, and I haven’t seen anything that would suggest a near-term financial hit or structural breakup. That’s not to say it couldn’t happen, but so far, the stock hasn’t seen a material negative impact as a result of these cases.

Yes, it’s a distraction. Yes, it’s draining management time and legal resources. But when you operate at Alphabet’s scale — with trillions of search queries, billions of users, and a presence in virtually every country — friction with regulators is just part of the landscape.

AI Spending: A Key Test for Investor Sentiment

Here’s one of the biggest wildcards heading into this earnings release: Alphabet’s massive $75 billion capital expenditure plan for 2025, most of which is directed at AI infrastructure.

The company has stated that it’s investing aggressively in AI — both on the consumer-facing side (like AI Overviews in Search), and in the backend infrastructure that powers its cloud services, like TPUs and custom silicon for machine learning training and inference.

What I’ll be watching for in the Q1 earnings call is whether management adjusts that spending plan.

With recent macro uncertainty — including the rise in tariffs and trade tensions — there’s always a chance they pull back a bit. But as a long-term investor, I’d prefer to see Alphabet stay the course. In fact, a surprise upside would be if they said something like:

“Because of the recent rise in tariffs and the increasing complexity of global supply chains, we believe our AI infrastructure is more valuable than ever, and we plan to accelerate our investments.”

That would be music to shareholders’ ears.

Google Search: Holding Strong… But for How Long?

Search is still Alphabet’s bread and butter, and it’s performing well. In the last quarter, Google Search revenue grew from $48 billion to $54 billion, year-over-year.

That’s solid growth — but it’s also where Alphabet faces the most uncertainty looking ahead. Large language models (LLMs) like ChatGPT, Gemini, and others are becoming increasingly good at answering consumer questions — sometimes more effectively than a traditional search engine.

So the big question is: Will user behavior shift away from Google Search toward AI assistants? And if it does, can Alphabet still monetize that attention as effectively as it does through traditional paid search ads?

To counter this, Alphabet has rolled out AI Overviews in Search — a hybrid of its traditional format and generative summaries that help users get answers faster. That’s a step in the right direction, but this space is evolving fast. I’m tracking this segment closely each quarter, listening to management commentary, and looking for signals that usage, monetization, or advertiser behavior is changing.

So far, the numbers are holding up. But the long-term risk is there, and it’s something investors shouldn’t ignore.

Alphabet's Q4 Results and Investment Outlook: Advertising, AI, and Autonomous Ambitions

In early February, Alphabet reported mixed financial results for the fourth quarter, falling short of analysts’ consensus revenue expectations. While total sales grew a modest 12% year-over-year to $96 billion, the company still managed to expand its operating margin by 5 percentage points, and GAAP earnings surged 31% to $1.64 per diluted share — highlighting strong profitability despite the top-line miss.

Core Thesis: Dominance in Ads and Cloud

Alphabet’s long-term investment case remains rooted in its dominance across digital advertising and cloud computing. As the largest ad tech company in the world — thanks to flagship platforms like Google Search, YouTube, and Google Ads — Alphabet continues to command an outsized share of global digital ad spend.

Meanwhile, Google Cloud, now the third-largest public cloud provider, is scaling quickly. A major driver of growth in both segments has been Alphabet’s increasingly effective integration of artificial intelligence. The company is leveraging AI to enhance search relevance, optimize ad performance, and deliver advanced cloud tools. Notably, the launch of its Gemini AI platform led to a 20-fold increase in usage of AI cloud developer tools in 2024, signaling strong enterprise demand.

Emerging Opportunity: Waymo and the Future of Mobility

Beyond its core businesses, Alphabet also holds a high-upside opportunity in autonomous driving through its Waymo subsidiary. Waymo has already launched robotaxi services in several major U.S. cities, including recent expansions into Austin, Texas and an upcoming rollout in Atlanta, Georgia.

According to forecasts from Citigroup, the autonomous ride-hailing market is expected to grow at a 30% compound annual rate through 2030. While still in its early stages, Waymo gives Alphabet exposure to a potentially transformative growth market that could become a significant value driver in the years ahead.

Google Cloud: Quietly Becoming a Powerhouse

On the flip side, Google Cloud is one of Alphabet’s most exciting growth engines, especially as it ties directly into the AI trend.

Last quarter, Google Cloud revenue rose from $9.2 billion to $11.9 billion, and more importantly, operating profit jumped from $864 million to $2.1 billion. That’s more than 140% growth in operating profit year-over-year.

This is the part of Alphabet’s business that benefits the most directly from enterprise AI adoption. Whether companies are training models, hosting datasets, or running inference at scale — they need cloud infrastructure. And Google Cloud has been investing heavily to capture that demand.

It’s also worth noting that Alphabet’s property, plant, and equipment — which includes their global network of data centers — has increased from $134 billion to $171 billion over the past year (net of depreciation). A lot of that spend is going directly into AI-optimized infrastructure.

Capital Allocation: They're Still One of the Best

Here’s one of the most overlooked — but powerful — metrics that gives me confidence in Alphabet’s long-term strategy: return on invested capital (ROIC).

Over the last decade, Alphabet has improved its ROIC from 27.8% to 32.1%. That’s an incredible feat for a company of this size, and it tells us something critical:

Alphabet knows how to allocate capital better than almost any other company on Earth.

So when they tell me they’re planning to spend $75 billion in capex, I say: Great. Do more of it.

They’ve earned my trust.

My Valuation Model: Alphabet Is Undervalued

Despite regulatory uncertainty, Wall Street forecasts 9% earnings growth for Alphabet in 2025. The stock currently trades at 19 times forward earnings, which places it somewhere between fair value and slightly elevated relative to historical averages.

However, Alphabet has a strong track record of outperforming expectations — it has beaten consensus EPS estimates by an average of 8% over the past six quarters. If that trend continues, and investor sentiment drives the P/E multiple back up to 26x (still below its 12-month high), Alphabet could reach a market cap of $3 trillion by 2026 — surpassing Apple’s current valuation.

Based on my discounted cash flow analysis, I estimate Alphabet’s intrinsic value at $216 per share. With the stock currently trading around $151, that implies a ~30% margin of safety.

I’ve included Alphabet in my list of the Top 9 Stocks to Buy in 2025, and this valuation gap is one of the core reasons why.

Buy Before or After Earnings?

So finally — let’s answer the big question.

Should you buy Alphabet stock before the Q1 earnings release, or wait until afterward?

If you’re a risk-tolerant investor, I believe the undervaluation is significant enough to warrant buying ahead of the report. Alphabet is trading well below intrinsic value, and while there’s some volatility risk, the long-term thesis remains strong.

However, I’ll also say this: This might be one of the more unpredictable earnings reports Alphabet has had in years. Between tariffs, AI adoption, and advertising trends, we could see some surprising commentary that moves the stock sharply — in either direction.

So if you’re someone who prefers to avoid short-term uncertainty, there’s nothing wrong with waiting until after the earnings drop. You may end up buying a bit higher, but you’ll also have more clarity.

Bottom Line: Alphabet remains one of the most dominant, innovative, and financially sound companies in the world. Yes, risks exist. But for long-term investors, this is the kind of business you want to own — especially when it’s trading at a discount.

Disclaimer: I want to make it clear that I am not a financial advisor, and nothing I say is intended to be a recommendation to buy or sell any financial instrument. Additionally, it's important to remember that there are no guarantees or certainties in trading or investing, and you should never invest money that you can't afford to lose.

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