Alphabet Inc. is scheduled to release its third-quarter operating results on Oct. 28, and investors are watching for signs that artificial intelligence is sustaining growth in its core businesses. The stock currently trades at a valuation that analysts consider reasonable, with the upcoming report expected to confirm whether momentum in Google Search and Google Cloud can support further gains.
Google Search remains the primary revenue driver for Alphabet, accounting for more than half of the company's total revenue. To address concerns that AI chatbots might disrupt traditional search, the company introduced AI Overviews and AI Mode. AI Overviews provide AI-generated responses above standard search results, while AI Mode offers a chatbot-style interface for expanded queries. CEO Sundar Pichai stated on the previous quarterly conference call that AI Mode has surpassed 1 billion monthly users. He noted that these features are increasing overall Google Search usage, which in turn drives higher ad revenue. This trend helped the platform generate a record $63.3 billion in revenue during the second quarter ended June 30, a 17% increase year over year.
Google Cloud is the fastest-growing segment of the business, delivering record second-quarter revenues of $24.8 billion. This represented an accelerated growth rate of 84%. The platform gives businesses access to processing power from advanced data centers and provides pre-built foundation models that serve as the base for creating AI software. As of June 30, Google Cloud held a $514 billion order backlog from customers awaiting new AI infrastructure. Wall Street analysts will closely monitor this backlog figure on Oct. 28; an increase during the third quarter would signal that demand for AI computing capacity remains strong.
Alphabet's second-quarter earnings per share surged by 294% year over year to $9.11, a figure largely driven by a non-operating event. The company recognized over $90 billion in fair market value for its SpaceX stake following the Space Exploration Technologies IPO in June. Alphabet had invested $900 million in SpaceX through a private placement in 2015, but accounting rules required the revaluation after the public offering. Consequently, this earnings spike does not reflect underlying operating performance.
Excluding this one-off gain, Wall Street estimates suggest Alphabet's earnings stabilized at approximately $3.02 per share in the third quarter, representing a modest 5% year-over-year growth rate. Looking ahead, analysts project earnings of $14.98 per share for 2027. This places Alphabet's forward price-to-earnings ratio at 23.4, a slight premium to the Nasdaq-100 index's forward P/E of 22.1. The stock has returned around 45% over the past 12 months, and the third-quarter report is expected to determine if this upward trajectory continues based on operating results in search and cloud.