3 Reasons Alphabet Stock Has Investors Buzzing Right Now

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) has almost doubled over the past year, and its shares have handily outperformed the S&P 500 year to date. The online advertising giant continues to post high revenue growth while boosting margins.

While ads are still a major part of Alphabet's revenue, that's not what is attracting most investors. The company has positioned itself at the center of multiple AI opportunities, which have the potential to provide long-term market-beating returns at current levels.

These are some of the reasons investors are still excited about Alphabet.

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Cloud revenue is surging

Google Cloud has become the most important part of Alphabet's business. The growth in cloud computing has quickly turned it into a large slice of total sales that could eclipse advertising revenue within a decade.

Alphabet generated $24.8 billion from Google Cloud, compared to $94.5 billion in Google Services revenue, which is mostly from online ads. The cloud segment also grew by 82% year over year, compared to a 17% growth rate for Google Services.

The differences between those growth rates indicate why Google Cloud could become a larger part of the business than online ads. Its operating margins are also improving vastly. Google Cloud delivered $2.8 billion in net operating income in second-quarter 2025, and that figure more than tripled to $8.8 billion in the most recent quarter.

Google Cloud also reached a $514 billion backlog, with Gemini Enterprise playing a key role. It reached that level thanks to more than $50 billion in sequential growth. Nearly 90% of the Fortune 500 uses this feature, and as their budgets expand, so will Google Cloud's revenue.

Gemini reaches 950 million monthly active users

Gemini was Alphabet's answer to ChatGPT. It was only a few years ago when bearish investors sounded the alarm about ChatGPT biting into Google's search engine market and putting the company in a challenging position.

Sometimes, the bears can overestimate risks, and that presented a compelling buy-the-dip opportunity for investors. The Gemini app recently crossed 950 million monthly active users, and the Q2 earnings call transcript offered more details.

Alphabet said that Omni, a feature in Gemini that lets users create videos based on prompts, experienced a 40% increase in daily active users creating videos on the Gemini app. The company is also working on Gemini 4, which is a more advanced AI model.

It's also attracting businesses. Gemini Enterprise is changing how companies create AI agents, enable automations, and set up cybersecurity. Alphabet has also become its own case study, with Gemini boosting conversions for its sales team and addressing 75% of support queries autonomously.

Waymo is gaining traction

Waymo didn't get much attention in the Q2 press release, and executives just hinted at scaling Waymo in the Q2 earnings call. However, the self-driving vehicle company surpassed 500,000 fully autonomous rides per week in the first quarter.

Alphabet is still burning through cash to support this venture, but it has plenty of profits to make it work. This is similar to how Google endured many years of net losses for its cloud segment, and it became a critical part of the business.

Waymo established itself as the leader in the autonomous vehicle race. Grand View Research anticipates a 20.2% compound annual growth rate (CAGR) for this industry through 2033, suggesting Waymo has a lot of runway. Other companies are scrambling to capitalize on the opportunity, but being first can make it harder for competitors to penetrate the industry in a meaningful way.

As Waymo gets the green light to operate in more cities, demand should continue to build. Consumer benefits for this technology are vast. It's expensive to operate a business like Waymo, but that ironically gives Alphabet a massive advantage. Not only is it ahead of existing competitors, but the high barrier to entry keeps most potential competitors out of the industry.

Although there wasn't much news about Waymo in Q2, the self-driving company could become a significant part of the business within a few years.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.