As Alphabet prepares to report its second-quarter earnings on Wednesday (U.S. time), investor attention is sharpening, driven by the company’s attractive valuation and strengthening growth outlook. The stock is currently trading at the lowest forward price-to-earnings (P/E) ratio among the so-called “Magnificent Seven,” fueling renewed interest among market participants.
A series of broker upgrades last week highlights growing optimism around Alphabet’s performance in the second half of 2025. According to Josh Gilbert, Market Analyst at eToro, “Alongside cloud and YouTube, the long-term focus remains firmly on artificial intelligence. Alphabet is continuing to invest heavily in Gemini, its flagship AI assistant, as well as AI-powered ad products and enterprise tools.”
Investor enthusiasm for monetisable AI applications is likely to put Gemini’s integration into core services like Google Search, Workspace, and Cloud under the spotlight. “Updates in these areas could be a key focus for investors this quarter,” Gilbert added.
However, despite the bullish sentiment around AI, there are still risks on the horizon. “Some investors remain cautious about the long-term impact that generative AI technologies could have on traditional Google Search,” said Gilbert. “The rise of platforms like ChatGPT, and growing evidence that younger users are turning to social platforms like TikTok for information, are creating questions about the future of Search as the dominant gateway to the web.”
Alphabet is also facing ongoing regulatory challenges. A U.S. judge is expected to rule soon on structural changes to the company following last year’s antitrust ruling related to Google Search. “Talks of a potential forced divestment of Chrome could pose a serious challenge to Alphabet’s search ecosystem. Until more clarity emerges, some investors will remain on the sidelines,” Gilbert noted.
Capital expenditure is another key area to watch. With the tech sector racing to scale up AI infrastructure, Alphabet’s spending is likely to remain in focus. “In this environment, it’s spend or get left behind. If demand continues to rise, we may see full-year capex guidance lifted once again,” Gilbert said.
Alphabet’s cloud division will also be closely watched. “Google Cloud remains a key growth engine. The market is expecting around 27% year-on-year growth this quarter. A beat here, combined with solid Search performance, could give the stock a meaningful boost post-earnings,” Gilbert concluded.
