Alphabet (GOOGL), which is Google’s parent company, will report its first quarter 2025 financials on Thursday, April 24. Heading into Q1 earnings, GOOGL shares have seen a sharp pullback, down more than 21% year-to-date. 

Concerns related to tariffs and a potential slowdown in Search revenue due to macroeconomic headwinds have weighed on investor sentiment. Despite these headwinds, Q1 could still be strong, with solid user engagement across Search and YouTube and sustained performance in the Cloud business. 

Alphabet: Q1 Expectations 

Wall Street is anticipating a year-over-year improvement in its top and bottom lines. Analysts forecast the tech giant will report earnings of $2.01 per share for the quarter, a 6.35% increase from the $1.89 it earned during the same period last year. 

Notably, Alphabet has a strong history of outperforming expectations, having beaten earnings estimates in each of the past four quarters. In its most recent report, the company topped expectations by 1.4%.

Google’s integration of artificial intelligence (AI) across its offerings enables it to win customers and drive engagement. For instance, features like AI Overviews and Circle to Search enhance the user experience in Google Search, resulting in higher engagement. Meanwhile, YouTube remains the leader in streaming watch time and podcast content. On the enterprise side, the AI-powered Google Cloud platform is seeing rising customer demand.

Together, Cloud and YouTube exited 2024 at an annual revenue run rate of $110 billion. This momentum will likely sustain in Q1.

Alphabet’s Core Growth Drivers 

Despite ongoing macroeconomic challenges, Alphabet’s core businesses — Search, YouTube, and Cloud — could continue to drive its financials in Q1. Advertising revenue will likely improve in the first quarter, driven by the continued strength of Search and YouTube ads.

Alphabet is enhancing its Search experience with innovations like generative AI for smarter answers and new features such as AI Overviews. These upgrades are making Search more engaging and valuable, which in turn is attracting more advertisers.

YouTube is also performing well, especially in brand and direct-response advertising. As the top video streaming platform, YouTube is seeing increased watch time, and its short-form content, YouTube Shorts, is becoming more profitable. The monetization of Shorts has improved significantly, especially in the U.S., and brand advertising for Shorts remains strong.

Alphabet’s Cloud division will likely sustain momentum and deliver solid growth. In 2024, the company saw a more than twofold increase in first-time commitments compared to 2023. It also closed several high-value strategic deals, including multiple contracts worth over $1 billion, while the number of deals exceeding $250 million doubled. With growing traction in AI-powered databases, cybersecurity solutions, and data analytics, the Cloud segment will be a strong contributor again in Q1.

Google’s AI tools for enterprise customers are also gaining traction. Last quarter, the company launched Google Agentspace — a platform designed to help businesses synthesize data, automate workflows, and build powerful AI agents. It also rolled out its Gemini AI capabilities across all Google Workspace Business and Enterprise plans, aiming to enhance productivity at scale.

Another bright spot in Alphabet’s revenue mix is its subscription and device business. Subscription services like YouTube TV and YouTube Music continue to attract new users, adding to Alphabet’s recurring revenue base. The company is seeing steady growth in the number of paid subscribers, a trend that bodes well for long-term stability and revenue diversification.

Alphabet Stock: Analysts Suggest a  ‘Strong Buy’ Ahead of Earnings

Looking ahead, analysts are bullish. The consensus rating on GOOGL stock is a “Strong Buy,” and the recent dip in share price has made its valuation more attractive. With an average price target of $202.06, analysts project potential upside of over 35% from current levels.

In short, Alphabet appears well-positioned heading into its Q1 report. A resilient ad business, booming cloud segment, strength in YouTube, and a strong AI-driven innovation pipeline suggest the company is well-positioned to deliver solid growth. For long-term investors, this pullback in GOOGL stock could be an opportunity to buy.