Google Q2-25 Earnings Recap

$GOOGL Search Is Not Dead!

Google exceeded investor expectations when it reported its Q2-25 earnings yesterday, after the bell. As regular readers of this Substack are aware, I have been bullish on Google as a favored stock since I began writing Accrued Interest.

While many blogs use AI to generate quick recaps of earnings, devoid of context, I want to give you color that AI cannot provide. So, for my update today, I am sharing my top 10 quotes from the earnings conference call with Google management.

1)Discussing Search activity — Sundar Pichai, CEO

Accrued Interest Take:

• My ongoing thesis has been that Google’s already discounted valuation reflected investor concerns about its competitive moat.

• A counter to the "bear" perspective that Google's core search business is losing share to competitors such as ChatGPT, is that GOOG is adapting its business model using AI Overviews.

2)Discussing YouTube growth — Sundar Pichai, CEO

Accrued Interest Take:

• YouTube is experiencing growth and improved monetization. A key concern for investors has been the short-form video format "Shorts," YouTube's answer to Meta's Reels and the service TikTok.

• Initially, there were fears that Shorts would cannibalize YouTube's revenue with its lower ad load. However, Google is saying Shorts in the U.S. are monetizing at the same rate as traditional in-stream YouTube content.

• While international rollout will take time, this demonstrates that Shorts will not dilute earnings.

3)Discussing AI usage — Sundar Pichai, CEO

Accrued Interest Take:

• "Tokens" are the basic units of text processed by AI, encompassing whole words, parts of words, or punctuation.

• The increasing processing of tokens indicates a significant ramp-up of AI across all Google services.

4)AI growing the addressable market — Sundar Pichai, CEO

Accrued Interest Take:

• Google argues that the AI revolution is broadening the applications of search engines. Previously, search entries were mostly printed text. With AI, Google can now leverage Search for video, images, and real-world information gathering.

• This expansion of the total addressable market (TAM) for all of Google's products and services is a long-term bullish indicator for the company.

5)Discussing YouTube dominance — Sundar Pichai, CEO

Accrued Interest Take:

• Subscribers of Accrued Interest know that I have been among the biggest BULLS when it comes to YouTube.

• Please check my archives and you will see I have been calling out this mega trend since I began this newsletter and podcast. I’ve been reporting on YouTube’s rise in June, May, April, March, Feb, and Jan of this year.

6)Discussing Waymo progress — Sundar Pichai, CEO

Accrued Interest Take:

• Waymo has been a frequent topic of this Substack, and I have shared how bullish I am on Waymo for both Google as well as Uber. I called out Waymo has a bright spot for Google last quarter, in my Q1 recap - 3 Reasons to Stay Bullish on Google Stock Following Q1 Earnings

• In my recent write-up recommending Uber stock, I argued that “investors now realize Uber and Waymo can collaborate” and create value for each other.

• As Waymo expands to more cities, investors are seeing that their technology and execution is years ahead of where Tesla is today.

• For my full thoughts on Uber, see my article, Uber's 2025 Performance: Why $UBER Stock Soared and What's Next.

7)Search advertising growth — Philipp Schindler, SVP and CBO

Accrued Interest Take:

• To emphasize the robust performance of Google Search revenue, I made the table below to show the YoY growth rates for the past six quarters.

• The results clearly indicate that any potential impact from ChatGPT and AI on search is NOT evident in the current performance.

8)YouTube advertising growth — Philipp Schindler, SVP and CBO

Accrued Interest Take:

• YouTube’s advertising growth is consistent with the fact that the service keeps taking share of entertainment watch time all over the world.

• Like Search, YouTube ad revenue experienced a slight reacceleration in Q2, growing by +13%, higher than Q1-25's +10% and closer to Q4-24's +14%.

9)Discussing Connected Television — Philipp Schindler, SVP and CBO

Accrued Interest Take:

• Last week on the Substack we covered the June Nielsen Gauge report that showed YouTube with a new all-time high of U.S. big screen TV viewing.

• See my article Media Stock Insights from Nielsen’s June-25 TV Snapshot, for the full details. Here is a look at YT’s trend over the last 6 months.

10)Higher Capex investments — Anat Ashkenazi, SVP and CFO

Accrued Interest Take:

• A key takeaway from the call was Google's announcement that they are increasing their capital expenditure forecast.

• I am optimistic about this investment in AI infrastructure, as it presents a significant opportunity for value creation.

• It was notable that Google's stock initially declined in after-hours trading following the CFO's mention of a higher capex budget, which I found ironic given Meta's recent positive reception for similar investment increases.

• Meta is throwing billions at high-priced engineers, while Google is investing in the full tech stack.

CONCLUSION

Google's stock closed approximately +1% today, giving up early gains from the opening and from last night. Over the course of the past month, the stock has risen about +15%.

This strong earnings report reinforces my belief in Google as a top "value" stock within the big tech sector, and across the market. I recommend maintaining a long position and suggest buying on any significant pullbacks.

-Accrued Interest

Disclaimer: The information presented in this Substack is for educational purposes and should not be construed as investment advice. Investors should make their own decisions regarding the prospects of any company discussed here, as I am not a registered investment advisor.

You can always reach me at simeon@accruedint.com.