Alphabet (GOOG) Q3 2025 Earnings Preview: The $100 Billion Milestone and the CapEx Imperative

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Alphabet (GOOG) is scheduled to report its financial results for the third quarter (Q3) of 2025 after the market closes on Wednesday, October 29, 2025.

This earnings report is happening while the stock is doing very well, having recently surged near record high prices above $268 and is close to the $270 target price set by several market analysts.

The results are highly anticipated because they will give investors a good look at how effective Alphabet's huge spending on infrastructure (CapEx) is proving to be in the worldwide competition for Artificial Intelligence (AI) leadership.

Markets generally expect Alphabet to show strong sales growth but believe its profits will be held back by high spending on investments.

Analysts predict the company's total sales (revenue) for Q3 2025 will be around $99.75 billion to $99.9 billion. If they can hit $100 billion, it would be a huge symbolic milestone, the first time Alphabet has reached that quarterly revenue level, proving their growth is robust. This forecast suggests sales will increase by about 13.0% to 13.4% compared to last year.

However, the profit per share (EPS) is expected to be a more modest $2.28, which is only a 7.1% to 8.0% increase. This gap, lots of new revenue but slower profit growth is the key takeaway. It shows the financial squeeze caused by the company's aggressive spending.

The market accepts this trade-off, understanding that Alphabet is temporarily sacrificing higher profits to pay for the massive infrastructure needed to build its future and lead the AI race.

It is important to note that the strong momentum from Q2 2025, where Alphabet exceeded expectations ($96.43 billion revenue and $2.31 EPS) , sets a high bar for Q3 performance.

Investors will be closely checking two main areas: how well the Google Cloud Platform (GCP) is operating, and how strong the core Google Services (mainly Search) business remains.

Google Cloud's performance is crucial for proving that the company's huge spending on AI is worthwhile, with sales expected to jump by about 30%. Although demand is clearly strong, a major risk is a reported "lack of capacity." If Google Cloud fails to hit its target of around $14.7 billion, the market will blame the company's operations, not weak customer demand.

Essentially, it means Google isn't building its infrastructure fast enough to handle the existing AI demand. This would raise serious doubts about whether the massive spending program is being managed efficiently to keep up with rivals like Microsoft Azure.

The Google Services division, mostly powered by Search ads, is expected to grow by about 10%. Even with this growth, the core search business is under threat from new AI competition like ChatGPT. Other AI tools are partnering with big retailers (like Shopify and Walmart) to let users buy things directly, bypassing Google Search entirely.

To counter this, management needs to show that the new AI features in Search (like AI Overviews and AI Mode) are keeping users engaged and successfully maintaining, or even boosting, the revenue generated from commercial searches.

The number one concern for market participants is the high cost of leading the AI race. Management previously increased its spending plan for the full year 2025 by $10 billion, bringing the total commitment to an unprecedented $85 billion. This massive investment is needed to pay for specialized AI infrastructure, including advanced servers and data centers. Analysts believe this spending could top $100 billion in 2026.

This huge cost is squeezing the company's immediate profits. To satisfy the market, management must do more than just say demand is high; they need to show quantifiable data proving that the new $85 billion investment is quickly making high-value services in Cloud and Search more profitable.

If Alphabet fails to show that this huge spending is generating adequate returns on investment (ROI), the stock will likely face strong negative pressure, even if total sales figures look good. The company's large-scale global investments, like the recent $15 billion infrastructure project in India, demonstrate its resolve to compete globally and strengthen Google Cloud's presence in Asia.

Alphabet's stock has rallied so strongly leading up to the earnings report thanks to good AI news and less regulatory pressure, the market is essentially expecting perfect results. This high anticipation means the stock is facing a high-stakes, all-or-nothing event, with a large potential movement of 6% up or down after the announcement.

The Good News (Bullish) Scenario: For the stock to jump higher, Alphabet needs to do two things. First, it must hit that symbolic $100 billion revenue goal and confirm that Google Cloud is growing strongly (over 30%). Second, management needs to sound confident that they can keep profits steady in the next quarter (Q4 2025) despite the massive spending (CapEx). Strong details on how efficiently they are using their new AI infrastructure are crucial.

The Bad News (Bearish) Scenario: For the stock to fall, they would likely miss the $99.9 billion revenue target, report weak Cloud growth because of capacity problems, or issue a poor profit outlook for Q4 due to uncontrolled spending. Since the stock has climbed so quickly, any disappointment could cause a major drop, confirming fears that the price went up "too far, too fast."

Ultimately, the most important part of the report won't be the sales and profit numbers for the quarter they just finished, but the forecast they give for Q4 2025 and 2026, particularly how fast they plan to spend on AI and when that spending will start making money.

Alphabet (GOOG) Daily Chart, October 28, 2025

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