Alphabet Inc. (GOOGL) is set to release its Q1 2025 earnings on April 24, drawing attention from investors across the technology sector. As part of the “Magnificent Seven” alongside Nvidia, Apple, Microsoft, Amazon, Meta Platforms and Tesla, Alphabet plays a critical role in shaping how artificial intelligence (AI) is deployed at scale. Its strategic use of AI in core areas such as advertising, cloud computing, and cybersecurity has strengthened its market presence. However, before making investment decisions, there are key developments worth considering.

Advertising Headwinds and Competitive Pressure

Alphabet’s primary revenue driver remains its advertising segment, built on the massive user bases of Google Search and YouTube. These platforms have long allowed the company to attract premium ad spending from global brands.

Yet the digital advertising landscape is evolving. The increasing use of large language models (LLMs) like ChatGPT is influencing how users access information, potentially reducing Google’s dominance in search-based ads. Additionally, companies like Amazon have partnered with platforms such as Pinterest and Snapchat, targeting younger, commerce-driven audiences a demographic Alphabet has historically relied upon.

Adding to this complexity, Alphabet is currently facing legal challenges, including antitrust scrutiny from the U.S. Justice Department. Ongoing litigation and accusations of monopolistic behavior may impact the company’s operational focus, particularly in advertising a segment already under pressure from market shifts.

AI Strategy: Strong Momentum With Underlying Risks

Alphabet has been aggressive in building AI capabilities across its ecosystem. Recent moves, including the acquisition of cybersecurity startup Wiz, underline the company’s intent to lead in AI-powered solutions. Alphabet’s AI initiatives are particularly visible in its Google Cloud division, where AI tools are being developed to enhance security and infrastructure services.

However, macroeconomic factors may limit near-term AI investment returns. For instance, potential tariff policies under a renewed Trump administration could indirectly affect the tech sector. Even though tariffs don’t directly impact software, broader budget constraints across industries may slow enterprise AI adoption, cloud migrations, or cybersecurity expansion.

Investors must listen closely to management commentary during the upcoming earnings call particularly around AI customer demand, enterprise spending trends, and anticipated economic headwinds.

Should You Invest $1,000 in Alphabet Right Now?

Before investing in Alphabet, consider this: The Motley Fool Stock Advisor team recently identified the 10 best stocks for investors to buy now, and Alphabet was not one of them.

Some of the companies on the list have generated significant returns. For example, if you invested $1,000 in Netflix when it was recommended in 2004, that investment would have grown to $532,771. Similarly, Nvidia has also performed well since being recommended in 2005, turning a $1,000 investment into $593,970. The Stock Advisor team has achieved a 781% average return, significantly outperforming the S&P 500 (which has gained only 149%).

Wait for Earnings Clarity Before Investing

Alphabet currently trades at an appealing forward price-to-earnings (P/E) ratio, which may attract value-oriented investors. However, unresolved legal challenges, shifting user behavior, and macroeconomic uncertainties suggest a cautious approach may be warranted.

Potential investors might benefit from waiting for Alphabet’s Q1 report rather than buying ahead of earnings. The upcoming call could offer clearer insight into how effectively Alphabet is navigating advertising challenges and converting AI investments into sustainable revenue.