Alphabet(US:GOOGL) First Shanghai Securities·2025-07-30 07:09Investment Rating - The report maintains a "Buy" rating for Google with a target price of $250, representing a potential upside of 28% from the current stock price of $196 [2][37]. Core Insights - Google's Q2 2025 performance exceeded expectations, driven by strong demand for core products, particularly in cloud services and AI solutions, leading to a significant increase in revenue and profit [3][9][37]. - The company is experiencing robust growth in its advertising and cloud business, with AI-related products enhancing user engagement and click-through rates [37]. Financial Performance Summary - Total revenue for Q2 2025 reached $96.43 billion, reflecting a year-over-year increase of 13.8% and a quarter-over-quarter increase of 6.9% [9][11]. - Net profit for the same period grew by 19.4% to $28.2 billion, with earnings per share increasing by 22% to $2.31 [11][37]. - Google's cloud revenue was $13.62 billion, showing a year-over-year growth of 31.6%, significantly outpacing overall business growth [9][18]. Revenue Breakdown - Google Services revenue was $82.54 billion, up 11.7% year-over-year, with strong contributions from search and YouTube advertising [9][16]. - YouTube ad revenue reached $9.8 billion, growing 13.1% year-over-year, driven by direct response and brand advertising [16][17]. - Subscription, platform, and device revenue totaled $11.2 billion, marking a 20.3% increase year-over-year, primarily from YouTube subscriptions [17]. Cost and Capital Expenditure - Total costs and expenses for Q2 2025 were $65.16 billion, with operating costs increasing by 9.9% year-over-year [10][11]. - Capital expenditures for the quarter were $22.4 billion, with the annual budget raised to $85 billion to support cloud and AI infrastructure [31][37]. Business Outlook - The overall business momentum is expected to remain strong, although Google Services revenue growth may be impacted by high comparatives from the previous year [33]. - The company plans to continue investing in AI and cloud infrastructure, with a focus on enhancing operational efficiency to mitigate rising costs [33][37].