GOOG News
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Google held its annual Dev Conference yesterday and announced a slew of new products and enhancements to its eco system. the company is probably leading the AI race-it certainly is not playing second fiddle to any other entity. Quietly pushing the boundaries of what is possible.
Gemini 2.5 Advancements:
Gemini 2.5 Pro is now the top-performing model on the LM Arena Leaderboard, excelling in reasoning, multimodality, code, and long-context tasks. It includes a new “Deep Think” mode for complex maths and coding, currently in experimental phase for trusted testers.Gemini 2.5 Flash is out of preview, offering improved performance and efficiency, requiring 20-30% fewer tokens for responses, making it a cost-effective option second only to 2.5 Pro.
Gemini Live, incorporating Project Astra’s camera and screen-sharing features, is available on Android and rolling out to iOS. It enables real-time assistance for tasks like interview preparation or object recognition.
AI Mode in Google Search:
Google introduced AI Mode, now rolling out to all U.S. users, enhancing Search with Gemini-powered conversational capabilities. It competes with ChatGPT and Perplexity by offering personalised results based on user history and location, such as tailored recommendations for dining or travel.Deep Search, available in Labs, conducts hundreds of searches to produce expert-level, fully cited reports for complex queries.
AI Overviews have scaled to 1.5 billion monthly users across 200+ countries, delivering faster and more accurate results.
Android XR and AR Glasses:
Google showcased its Android XR platform for VR headsets and AR glasses, featuring Gemini integration for real-time assistance, such as heads-up directions and live speech translation. Partnerships with Samsung, Warby Parker, and Gentle Monster were announced for AR glasses, though no release timeline was specified.AI-Powered Creative Tools:
Veo 3, a new AI video generator, creates clips with realistic audio, including dialogue and sound effects, enhancing creative workflows for filmmakers and content creators. -
OpenAI plans to add GOOG cloud service to meet its growing needs for computing capacity, marking a surprising collaboration between two prominent competitors in the artificial intelligence sector.
The deal, which has been under discussion for a few months, was finalised recently. It underscores how massive computing demands to train and deploy AI models are reshaping the competitive dynamics in AI, and marks OpenAI's latest move to diversify its compute sources beyond its major supporter MSFT.
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An incredible result from GOOG, $28B net income for a 13 week quarter. The stock has done well lately but there is still an overhang from sentiment that the company has anti trust issues and is spending too much on AI. I think these fears are materially overblown.
GOOG reported its second-quarter 2025 earnings on 23 July 2025, showing robust financial performance driven by strong growth in Search, YouTube, and Cloud segments, underpinned by advancements in artificial intelligence (AI). Despite a significant increase in CapEx, the company exceeded analyst expectations, though investor sentiment was mixed due to concerns over rising expenditure (always!)and regulatory challenges.Key Financials (Q2 2025)Revenue: $96.43 billion, up 13.8% year-over-year (YoY), surpassing estimates of $94 billion.
Revenue (ex-TAC-traffic acquisition cost): $81.2 billion, compared to expectations of $79.6 billion.
Earnings Per Share (EPS): $2.31 (adjusted), a 22% YoY increase, beating estimates of $2.18.
Net Income: $28.2 billion, up 19% YoY.
Operating Income: $31.3 billion, up 14% YoY, with an operating margin of 32.4% (flat YoY despite legal settlement costs).
Google Cloud Revenue: $13.62 billion, up 32% YoY, exceeding estimates of $13.11 billion.YouTube Advertising Revenue: $9.8 billion, up 13% YoY, slightly above estimates of $9.56 billion.
Search Revenue: $54.1 billion, up 11% YoY, surpassing expectations of $52.7 billion.
Traffic Acquisition Costs (TAC): $14.71 billion, in line with expectations.
Conference call highlights
AI-Driven Growth:Pichai emphasised that “AI is positively impacting every part of the business, driving strong momentum.” Search saw double-digit revenue growth, fuelled by AI features like AI Overviews (1.5 billion monthly users) and AI Mode (100 million monthly active users).Google’s Gemini AI model has grown to 450 million monthly users, reinforcing Alphabet’s competitive edge in AI against rivals like ChatGPT.
Google Cloud’s 32% YoY revenue growth was driven by demand for AI infrastructure and generative AI solutions, with an annual revenue run-rate exceeding $50 billion.
Capital Expenditure :Alphabet announced a $10 billion increase in its 2025 CapEx guidance, raising the total to $85 billion from $75 billion, reflecting strong demand for cloud and AI infrastructure.
CFO Anat Ashkenazi noted that Q2 CapEx was $22.4 billion, significantly above estimates of $18.2 billion, primarily for servers and data centres(nice). The increase is driven by a “tight supply environment” for chips needed to train and run AI models.
Ashkenazi highlighted that CapEx is expected to rise further in 2026 due to ongoing demand, but Alphabet is focused on efficient allocation to mitigate profitability concerns. A “highly rigorous process” ensures optimal use of resources.
The increased CapEx raised investor concerns about near-term profitability(we can see profit headwinds NOT), as depreciation costs are expected to accelerate in 2025 due to prior and ongoing infrastructure investments.
Positive Developments:Search: AI Overviews and AI Mode have boosted user engagement, enabling Alphabet to address more complex queries and maintain its dominance despite competition from AI-powered chatbots. Search revenue grew 11% YoY, outperforming expectations.
YouTube: The platform’s ad revenue grew 13% YoY, driven by increased viewership on Connected TV and Shorts monetisation, which now matches or exceeds traditional in-stream ads in key markets. YouTube’s shift to television as its primary consumption medium is eroding traditional network market share.
Google Cloud: The segment’s profitability improved, with an operating margin of 20.7% (up from 17.1% in Q1 2025), reflecting strong demand for AI and core cloud products.
Subscriptions and Other Bets: Subscription platforms (YouTube, Google One) grew 19% YoY to $10.4 billion, with 270 million paid subscribers globally. Waymo, Alphabet’s autonomous vehicle unit, is scaling, serving over 150,000 paid rides weekly.Talent and Innovation: Pichai downplayed concerns about AI talent wars, stating that retention and new talent acquisition metrics remain “healthy.” The company continues to innovate rapidly, with over 1,000 new cloud products and features launched in the past eight months.
After an initial soft after hours reaction, the stock rose a few dollars and futures are up nicely overall.