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Alphabet's AI upgrades and dominance in search continue to drive solid performances, countering fears of imminent disruption from AI competitors. Google's robust Q2 results have calmed fears, but its valuation suggests investors are still not fully convinced - an opportunity for us. Google is ramping up AI CapEx and leveraging its solid profitability to reinforce its competitive moat, while AI startups continue to burn cash.
GOOGL tops Q2 estimates as AI investments fuel cloud and search growth, with shares gaining momentum on strong forecasts.
Alphabet's strong position in Cloud and AI, bolstered by the Wiz acquisition, drives above-market revenue growth and enhances its competitive edge. The market initially reacted negatively to the Wiz deal, but investor sentiment improved as Google's multi-cloud strategy and security offerings became clearer. The company's core Search business remains robust, with double-digit revenue growth fueled by successful AI integration, dispelling concerns about competition from generative AI.
Alphabet remains mispriced, trading 11% below my fair value estimate, despite strong Q2 results and multiple growth drivers across its ecosystem. AI disruption fears are overblown; AI overviews and new features are driving more search queries, ad impressions, and engagement, not cannibalizing revenue. Google Cloud posted 31% YoY revenue growth, record margins, and a $106B backlog, justifying aggressive CapEx and establishing long-term vendor lock-in.
Alphabet's Q2 '25 results show robust revenue growth and continued dominance in Google Search, defying concerns about AI-driven competition. Google Cloud's rapid expansion and rising profitability underscore the success of Alphabet's strategic investments in cloud and AI infrastructure. Increased CapEx to $85B is a positive, growth-oriented move, supporting future expansion and higher-margin business segments, despite short-term market concerns.
Meta's aggressive AI talent poaching weakens OpenAI more than Alphabet, giving DeepMind a strategic advantage in the AI race. Alphabet's DeepMind boasts superior retention, a mission-driven culture, and a robust pipeline, translating research into products for billions. Financially, Alphabet's diversified revenue, strong cash flow, and custom hardware enable it to outspend rivals and sustain innovation.
Alphabet's core Google business continues to deliver double-digit growth, with strong performance in search, YouTube ads, and subscriptions. Google Cloud is accelerating, with 32% YoY revenue growth and improving margins, but is driving a surge in capital expenditures. Massive capex for AI and cloud is pressuring free cash flow yields below 1%, raising concerns about long-term shareholder returns.
The S&P 500 keeps soaring to new highs, making it feel impossible to find a cheap large-cap stock to buy today. This is especially true in technology and artificial intelligence (AI).
Alphabet remains undervalued despite strong fundamentals, with a forward P/E of 19x compared to Microsoft's 37x, and 13.8% YoY revenue growth in Q2. Google Search, which generates 56% of total revenue, is under threat from ChatGPT, but so far continues to grow and monetize effectively. Gemini 2.5 is being aggressively deployed across Google's ecosystem — including YouTube, Android, Search Ads, Photos, and Workspace — to close the AI gap with OpenAI.
An Argentine court is forcing Google to pay around $12,500 to a man who was caught in the buff on a Street View camera in his own backyard, according to reports.