Google AI Overviews drive 10% search growth as Alphabet reports $96.4B revenue

Alphabet reported second quarter 2025 revenues of $96.4 billion on July 23, representing 14% year-over-year growth, while disclosing that AI Overviews now drive more than 10% additional queries globally for the types of searches that display them. The earnings call marked the company's 40th quarterly report since becoming Alphabet in 2015.

Nick Fox, Senior Vice President of Knowledge & Information at Google, announced the AI Overviews milestone on July 24 through social media. "New stat dropped in yesterday's Alphabet earnings: AI Overviews are now driving over 10% more queries globally [new!] for the types of queries that show them! This growth continues to increase over time as people see that Search can help with even more of their questions," Fox stated.

According to the earnings documents, total operating income increased 14% to $31.3 billion with an operating margin of 32.4%. Net income reached $28.2 billion, up 19% from the prior year, while diluted earnings per share grew 22% to $2.31. The company generated $27.7 billion in net cash from operating activities during the quarter.

Google Services revenues increased 12% to $82.5 billion, driven by Google Search & other revenues of $54.2 billion, representing a 12% increase from the previous year. YouTube advertising revenues reached $9.8 billion, growing 13% year-over-year. Google Network revenues declined slightly to $7.4 billion, down 1% from the prior period.

The company's cloud computing division posted significant gains with Google Cloud revenues increasing 32% to $13.6 billion. Operating income for the cloud segment jumped to $2.8 billion from $1.2 billion in the prior year, achieving an operating margin of 20.7% compared to 11.3% in Q2 2024.

Capital expenditures surged 70% to $22.4 billion in the second quarter, marking the highest quarterly infrastructure investment in company history. The spending primarily supported data center expansion and AI infrastructure development. CEO Sundar Pichai announced plans to increase capital expenditures to approximately $85 billion for 2025.

The AI Overviews feature has undergone rapid global expansion since its initial deployment. Google Search's AI Overviews are a relatively new feature utilizing artificial intelligence to present summaries of search results. The company expanded the feature to 200 countries and 40 languages as of May 2025, significantly increasing its reach from the initial U.S.-only launch.

However, AI Overviews create unprecedented split between visibility and website traffic according to industry analysis. Research shows that while search impressions increase, click-through rates to external websites have declined substantially. Studies indicate organic click-through rates for AI Overview queries dropped 54.6% year-over-year in 2025.

The marketing community faces substantial adjustments due to these changes. Brainlabs study shows AI Overviews now appear in 200 countries while marketing teams struggle to adapt. The research found that 96% of AI Overview links come from top 10 organic results, though user engagement patterns differ significantly from traditional search results.

Analysis reveals complex user behavior patterns with AI-generated content. Most users only read top third of Google AI Overviews, according to comprehensive user experience research published in May 2025. The study tracking 70 users across eight search tasks found median scroll depth reached only 30% of AI-generated summaries.

Despite traffic concerns from publishers, Google maintains that AI Overview clicks are "higher quality" despite traffic decline. Company representatives argue that reduced click volume compensates through improved user engagement and conversion rates from visitors who do click through to websites.

The economic implications extend beyond traditional search metrics. Research indicates AI search visitors worth 4.4x more than traditional organic traffic, suggesting fundamental shifts in digital marketing value propositions. Projections indicate AI channels may drive economic value equal to traditional search by late 2027.

Google has begun integrating advertising into AI-powered search features. The company launches ads within AI Overviews, offering advertisers new ways to reach consumers through AI-driven search summaries. These advertisements appear directly within AI-generated responses when relevant to user queries, maintaining transparency through standard "Sponsored" labeling.

Furthermore, Google search head reveals "game system" approach as AI mode begins advertising rollout. The company confirmed plans to introduce advertisements within AI Mode, an experimental conversational search interface that provides ChatGPT-like experiences within Google Search.

Technical implementation includes enhanced measurement capabilities. Google AI Mode now counts toward Search Console totals, addressing previous tracking gaps that affected website analytics. The integration allows website owners to monitor AI-driven traffic alongside traditional search metrics, though separate segmentation remains unavailable.

The broader competitive landscape shows increasing pressure from alternative AI platforms. ChatGPT could overtake Google search traffic by 2030 according to growth projections analyzing current adoption trends. ChatGPT weekly active users expanded eight-fold from October 2023 to April 2025, reaching over 800 million users.

Total traffic acquisition costs increased to $14.7 billion from $13.4 billion in the prior year. The company employs 187,103 people as of June 30, 2025, representing growth from 179,582 employees in the prior year period. Other Bets, Alphabet's experimental division, generated $373 million in revenues while posting an operating loss of $1.2 billion.

Research and development expenses reached $13.8 billion, up 16% from the previous year, reflecting continued investment in AI capabilities and infrastructure. Sales and marketing costs increased 5% to $7.1 billion, while general and administrative expenses jumped 65% to $5.2 billion, partially due to legal settlement charges.

The company's financial position remains robust with $95.1 billion in cash, cash equivalents, and marketable securities as of June 30, 2025. Long-term debt increased to $23.6 billion from $10.9 billion at the end of 2024, primarily due to senior unsecured notes issued in May 2025 for $12.5 billion in net proceeds.

Free cash flow declined to $5.3 billion from $13.5 billion in the prior year quarter, primarily due to increased capital expenditure for AI infrastructure. However, trailing twelve months free cash flow reached $66.7 billion, up 10% year-over-year.

Alphabet's stock has benefited from AI developments and strong financial performance. The company continues expanding AI integration across its product portfolio while managing the transition from traditional search advertising models to AI-mediated commercial interactions.

The quarterly results demonstrate Google's positioning at the intersection of search innovation and advertising technology. As AI Overviews drive increased search activity, the company faces the challenge of maintaining advertiser value while adapting to changing user behavior patterns that prioritize direct answers over website visits.

This transition represents a fundamental shift for the marketing industry. Traditional search engine optimization strategies require adaptation as AI-powered features change how users discover and consume information. The 10% query increase from AI Overviews indicates user acceptance of AI-mediated search experiences, though the long-term implications for web traffic distribution remain under evaluation.

Timeline

• July 23, 2025: Alphabet announces Q2 2025 earnings with $96.4 billion revenue, 14% year-over-year growth
• July 23, 2025: Company reports AI Overviews driving 10% additional queries globally during earnings call
• July 24, 2025: Nick Fox announces AI Overviews milestone via social media
• June 17, 2025: Google officially confirms AI Mode clicks count toward Search Console totals
• June 18, 2025: Industry analysis projects ChatGPT could overtake Google search traffic by 2030
• June 16, 2025: Research reveals AI search visitors worth 4.4x more than traditional organic traffic
• May 16, 2025: Study shows most users only read top third of Google AI Overviews
• May 2025: Google expands AI Overviews to 200 countries and 40 languages
• May 14, 2024: Google announces wide launch of AI Overviews feature

Summary

Who: Alphabet Inc., Google's parent company, announced quarterly results with key executives including CEO Sundar Pichai and SVP Nick Fox revealing AI Overviews performance metrics.

What: Alphabet reported $96.4 billion in Q2 2025 revenues (14% growth) while disclosing that AI Overviews now drive over 10% additional queries globally for relevant search types, representing significant user adoption of AI-powered search features.

When: The earnings announcement occurred July 23, 2025, with Nick Fox's AI Overviews disclosure made July 24, 2025, covering the quarter ended June 30, 2025.

Where: The global search ecosystem, with AI Overviews operating in 200 countries and 40 languages as of May 2025, while the earnings impact affects Alphabet's worldwide operations and advertising revenues.

Why: AI Overviews demonstrate increasing user acceptance of AI-mediated search experiences, generating additional search volume while fundamentally changing how people discover information online, though creating challenges for traditional website traffic and digital marketing strategies.

Key Terms Explained

AI Overviews: Google's artificial intelligence-powered feature that generates comprehensive summaries of search results, appearing at the top of search pages to provide users with direct answers. The feature now operates in 200 countries and 40 languages, fundamentally changing how users interact with search by reducing the need to click through to individual websites while increasing overall query volume by over 10% globally.

Search Query Growth: The measurable increase in search activity attributed to AI-enhanced features, with AI Overviews specifically driving 10% additional queries globally for relevant search types. This growth represents user behavioral shifts toward asking more complex, conversational questions when they understand that AI systems can provide comprehensive answers directly within search results.

Capital Expenditures: Alphabet's infrastructure investments reached $22.4 billion in Q2 2025, marking a 70% year-over-year increase primarily directed toward data centers and AI computing infrastructure. These expenditures support the computational requirements for AI Overviews, AI Mode, and other machine learning features that require substantial processing power and storage capacity.

Google Cloud: Alphabet's enterprise cloud computing division generated $13.6 billion in revenues with 32% growth, achieving a 20.7% operating margin compared to 11.3% in the prior year. The segment benefits from increased demand for AI infrastructure services as businesses adopt generative AI capabilities, positioning Google Cloud as a significant growth driver beyond traditional search advertising.

Click-Through Rates: Traditional organic search click-through rates for AI Overview queries declined 54.6% year-over-year, creating what industry analysts term "the great decoupling" between search impressions and website visits. This metric represents fundamental changes in user behavior where AI-generated answers reduce the necessity to visit external websites for information.

Operating Margin: Alphabet maintained a 32.4% operating margin on $96.4 billion in revenues, demonstrating the company's ability to scale AI features while preserving profitability. The margin reflects efficient cost management despite substantial investments in AI infrastructure, research and development, and global expansion of AI-powered search capabilities.

Traffic Acquisition Costs: Google's payments to distribution partners increased to $14.7 billion from $13.4 billion in the prior year, representing the costs associated with maintaining search traffic through partnerships with device manufacturers, browsers, and mobile carriers. These costs become increasingly important as AI features change user search patterns and competitive dynamics.

Digital Marketing: The industry experiencing fundamental transformation as AI Overviews alter traditional search engine optimization strategies, forcing marketing professionals to adapt from click-focused metrics to visibility and influence-based approaches. Marketers must now optimize content for both AI consumption and human readability across multiple platforms rather than focusing solely on website traffic generation.

Revenue Growth: Alphabet's 14% year-over-year revenue increase to $96.4 billion demonstrates the company's ability to monetize AI innovations while maintaining strong financial performance. The growth spans multiple business segments including search advertising, cloud services, and YouTube, indicating broad-based demand for Google's AI-enhanced products and services.

User Engagement: Research shows that while users interact differently with AI-generated content—reading only the top third of AI Overviews on average—those who do click through to websites demonstrate higher conversion rates and 4.4 times greater economic value compared to traditional organic search visitors. This engagement pattern suggests AI features may improve traffic quality even as overall volume decreases.