Shares of Alphabet (NASDAQ:GOOGL), the parent company of Google, have been on a strong run lately, climbing more than 23% in just three months. Much of this momentum in GOOGL stock can be attributed to the company’s aggressive push into artificial intelligence (AI).
Alphabet has been steadily incorporating AI into its products and services, and the results are beginning to show in both user adoption and financial performance. Let’s take a closer look.
AI is reinventing Google Search and advertising
Alphabet integrated AI across its entire ecosystem, from the cloud to consumer-facing tools. This strategy has enabled the tech giant to launch new products and enhance core businesses, such as Search, where AI-driven features are reshaping the way people interact with information online.
Recent updates, such as AI overviews, Circle to Search, Lens, and other AI-powered enhancements, are helping Google maintain its dominance in Search while also opening new opportunities for advertisers. The company’s latest initiatives are transforming digital marketing with tools like AI Max in Search, which has already been linked to a 14% lift in advertiser conversions. Meanwhile, Smart Bidding Exploration has been delivering nearly 20% more conversions for campaigns that adopt it. These types of improvements highlight the tangible ways AI is driving more effective advertising, a key part of Google’s revenue model.
That growth is evident in the numbers. In the second quarter, Google Services reported US$83 billion in revenue, a 12% increase from the prior year, with Search and other revenues contributing more than US$54 billion. YouTube has also seen healthy expansion, particularly in direct response ads, which continue to strengthen Alphabet’s advertising engine. The adoption of AI-powered creative tools has also surged, with more than two million advertisers now utilizing Google’s AI-generated assets, representing a 50% increase from last year.
AI is powering Google Cloud revenue
Google Cloud remains one of the strongest growth drivers for Alphabet, with its latest quarterly results highlighting how AI is driving adoption. In the second quarter, the segment reported revenues of US$13.6 billion, representing a 32% increase from the same period last year. Google Cloud Platform saw robust demand for both its core infrastructure and AI-focused products, while Google Workspace benefited from higher average revenue per user and an expanding customer base.
Profitability is improving just as quickly. Operating income for the division surged to US$2.8 billion, with operating margin nearly doubling year over year from 11.3% to 20.7%. This shift reflects stronger top-line growth and greater efficiency as Google Cloud scales.
Much of this performance reflects Alphabet’s ability to differentiate itself through a broad portfolio of AI products. Evidence of this demand is clear, as the number of deals worth more than US$250 million has doubled over the past year. Large contracts over US$1 million signed in just the first half of 2025 already match the full-year total for 2024, and customer growth on Google Cloud Platform remains sharp, with new clients up nearly 28% quarter over quarter.
Is Alphabet stock a buy now?
Alphabet’s integration of AI across Search, advertising, YouTube, and Google Cloud is already translating into solid revenue growth and driving customer adoption. Advertisers are reporting measurable improvements in campaign performance, while demand for Google Cloud services is accelerating thanks to new AI-driven tools. These developments highlight Alphabet’s ability to monetize AI at scale, strengthening its already dominant market position.
From a valuation standpoint, Alphabet stock looks compelling. GOOGL stock currently trades at a next 12-month price-to-earnings ratio of 20.9, representing a significant discount compared to its peers, Microsoft (32.3) and Amazon (33). This lower multiple, paired with Alphabet’s expanding AI product portfolio and solid revenue growth, suggests the stock has meaningful upside potential, making it a buy right now.
