Will Alphabet's Stock Keep Rebounding as Q2 Earnings Approach?

Core Viewpoint - Alphabet's stock has rebounded over 20% in the last three months, leading the broader market's recovery, with significant attention on its upcoming Q2 results [1][3] Group 1: Q2 Expectations - Q2 sales are projected to increase by 11% to $79.25 billion compared to $71.36 billion in the same quarter last year [4] - Expected Q2 EPS of $2.14 reflects a 13% increase from $1.89 per share a year ago [4] - Alphabet has exceeded top and bottom-line expectations for nine consecutive quarters, with an average sales surprise of 1.24% and earnings surprise of 14.64% over the last four quarters [5] Group 2: Market Challenges - Concerns exist regarding Alphabet's Google Cloud services losing market share to Microsoft's Azure and Amazon's AWS, leading to job cuts in the cloud division [2] - The core search business faces rising competition from AI-powered platforms like ChatGPT [2] Group 3: Capital Expenditure and Financial Health - Alphabet plans to spend $75 billion on AI infrastructure in 2025, up from $52.4 billion in 2024 [7] - The company had over $95 billion in cash and equivalents at the end of Q1, with total assets of $475.37 billion, significantly above total liabilities of $130.1 billion [11] Group 4: Valuation Metrics - Alphabet's stock trades at a forward P/E ratio of 19.3X, making it the cheapest among its "Magnificent 7" peers, while the S&P 500 is at 24.3X [13] - The forward P/S ratio of 6.8X positions GOOGL as the second most affordable in the Mag 7, trailing only Amazon's 3.4X [14] Group 5: Investment Outlook - Alphabet stock holds a Zacks Rank 3 (Hold) and is on track for double-digit growth in fiscal 2025, indicating it remains a viable long-term investment [17]