Surveys suggest demand for internet search advertisements is healthy. And advertisers were surely relieved when Google said Monday that it had abandoned a project that would have eliminated software “cookies” from its Chrome browser. Privacy advocates condemn the software tracers, but that is how most advertisers track consumers on the internet.

Combine that top-line tailwind with Google’s position at the forefront of generative artificial intelligence, and you get a stock that is up 30% this year—twice the rise of the

S&P 500.

At its recent price of $182, Alphabet goes for 21 times the consensus forecast for 2025 earnings. Many think that isn’t too expensive for a member of the Magnificent Seven.

“We view current valuation as undemanding given the strength of the underlying digital ad market and the considerable optionality for Google across advertising and cloud, as AI monetization continues,” wrote Wedbush analyst Scott Devitt in a Monday note.

In June, Alphabet began paying a 20 cent quarterly dividend. It is also working its way through a $70 billion stock buyback program.

The average of the sell-side forecasts gathered by FactSet anticipates total June revenue at Alphabet grew 5% sequentially from March to $84.3 billion. That would represent a 13% year-over-year rise and a bit of a deceleration from March’s 15.4% year-over-year rise.

Another of the March quarter surprises was the size of capital spending at Alphabet and its AI rivals, such as

Microsoft

and

Facebook

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Meta Platforms
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To free up cash for AI, Google has tried to control expenses with layoffs in some of its operations. That expense control was a reason for the upside surprise in March earnings.

Expenses are increasing, nevertheless. Depreciation must grow when capital spending jumps from $32 billion in the 2023 year to an expected $50 billion in 2024.

So for the June quarter, the average forecast for Alphabet’s net income is for it to tick down 3% sequentially, to $22.9 billion, or $1.85 a share. That would still be a nice 50% year-over-year jump.

On the earnings call, analysts will surely probe Chief Executive Sundar Pichai about the company’s reported attempt to acquire cloud security vendor Wiz for $23 billion. As of Monday evening, Wiz was still intent on remaining independent. But Alphabet, and Microsoft, will continue to try to enhance the security of their computing platforms.

Wedbush’s Devitt will be scrutinizing three things in the June report: the growth in Alphabet’s spending and capital investment for AI; the company’s guidance on ad sales growth in the second half; and progress in monetizing AI cloud services (that is, will customers pay up for the company’s AI offerings).

Like three-quarters of the analysts who follow Alphabet, Devitt rates the stock a Buy. There is still about 12% upside to his $205 price target.

Write to Bill Alpert at [email protected]