Alphabet Q1 2025 Earnings Preview: Can AI Momentum Offset Slowing Growth?

Alphabet tipped to deliver modest earnings growth

Analysts are forecasting adjusted EPS of $2.05. Revenue is expected to come in at $75.4 billion, representing 5.7% YoY growth, down from 8.4% in Q4. Net income is set to hit $24.7 billion. Despite the softer revenue trajectory, Alphabet has consistently outperformed expectations, beating EPS in 8 of the last 8 quarters. That track record will be tested this quarter amid macroeconomic headwinds and increasing AI-induced capital intensity.

Investors look for bullish catalysts after AI trade wanes

Shares of Alphabet have lagged the broader tech rally year-to-date, down nearly 18%, closing at $155.35—well off the 52-week high of $207.05. That puts the stock's trailing P/E at 19.6x, with a forward P/E of 17.7x, modestly below sector averages. Analyst sentiment remains positive, with 60 buys, 15 holds, and 0 sells, and a consensus target price of $202.96, implying a 30% upside.

Key Drivers: AI Search, Gemini, and Cost-per-Click

According to Bloomberg Intelligence, the key to Alphabet’s quarter lies in Google's search monetisation and Gemini AI integration. Gains in cost-per-click rates have helped offset weaker volume growth, but the company is walking a fine line between innovation and erosion of core ad margins. Commentary around AI monetisation strategy and competitive positioning in the search and cloud businesses will be pivotal.

Margins in focus as AI overinvestment fears persist

While Alphabet remains one of the most profitable companies in the world, margin erosion is becoming a concern. EBITDA margins declined to 44.0% in Q4, down from 46.1% in Q3, and are expected to compress further as AI infrastructure costs mount. Analysts will be paying close attention to capital expenditures, which surged to $13.7 billion last quarter and are forecast to remain elevated.

Technical analysis: Alphabet shares show signs of trend reversal

Alphabet shares are in a downtrend. However, there are some signs of a looming reversal. The daily RSI is showing modest upside momentum along with a possible higher low on the charts. A clear downward sloping resistance line stands in the way of a potential break-out, which may see a test of resistance at $US162 is broken. A break through the stock’s $140 low would indicate a continued bearish trend.

With a 6.0% implied move on earnings day, Alphabet may be poised for a significant re-rating—positive or negative. Investors will want to see clear signs that the company can defend its search moat, monetise AI, and manage costs prudently to justify a return to premium valuation territory.

^{(Source: Trading View)}
(Past performance is not a reliable indicator of future results)