2Q25 Earnings Updates: Part One – GOOG, IBM, TMUS, META, VICI, and AAPL

Alphabet (GOOG): GOOG delivered a strong reassurance to investors with its 2Q25 earnings report, underscoring its market leadership and the successful execution of its AI-first strategy. The company reported robust consolidated revenue growth of 14% year-over-year, driven by double-digit gains across Google Search & other, YouTube ads, and Subscriptions, alongside a significant 32% surge in Google Cloud revenue. AI is clearly impacting every part of the business, with Search AI Overviews now reaching over 2 billion monthly users and AI Mode surpassing 100 million monthly active users in key markets, both contributing to incremental queries. Importantly, Google Cloud achieved a major milestone, expanding its operating margin dramatically to over 20%, transforming it into a formidable, high-margin growth engine for Alphabet. One outstanding risk is the federal antitrust case, where no ruling has been made on remedies. GOOG plans to appeal any decision, which will delay any potential impact for years. While the company’s bold increase in its 2025 capital expenditure forecast to $85 billion will temporarily weigh on free cash flow, reflecting unprecedented investment in AI infrastructure and Cloud capacity, we view this as a strategic necessity that addresses strong demand and ensures long-term leadership, rather than a cause for concern. Analysts have responded by largely raising forward earnings estimates and price targets, recognizing Alphabet’s dual-engine growth and attractive valuation relative to peers. Coupled with ongoing, substantial share buybacks and a growing dividend program, Alphabet continues to prioritize returning capital to shareholders, making it a compelling long-term value proposition.

IBM (IBM): IBM reported better-than-expected 2Q25 results, with revenue, profit margins, and free cash flow all coming in ahead of expectations. The company also raised its full-year free cash flow expectations slightly, from “about $13.5 billion” to “more than $13.5 billion.” Despite these solid headline numbers, shares moved 5% lower after the report, repeating a pattern we saw last quarter. Much like in 1Q25, investors looked past the strong headlines and focused on the details underlying the growth. Total revenue rose 8% year over year, but just 5% at constant currency, pointing to a significant foreign exchange tailwind. This dynamic adds some noise to the top-line outperformance and raises fair questions about the sustainability of the growth rate. Software delivered solid results overall, up 8% at constant currency, driven by strong performance in Red Hat and Automation, both of which grew 14%. However, Transaction Processing, the high-margin legacy portion of Software, declined 2%, which was disappointing in an area typically viewed as stable. Consulting revenue remained flat despite a growing backlog of generative AI deals now exceeding $7.5 billion, highlighting the lag between bookings and revenue that continues to fuel investor skepticism. Management reiterated that it does not expect meaningful AI revenue contribution from Consulting in 2025, which keeps that story more about potential than realization for now. One positive surprise came from Infrastructure, which grew 11% at constant currency, far above expectations. This could signal significant underlying strength for the upcoming mainframe cycle. The modest raise in free cash flow guidance was framed as a conservative move. Overall, the quarter supports IBM’s long-term transformation toward a software-driven and AI-led model, but the reaction shows that investors are still looking for more evidence of consistent, organic growth across all segments. With the stock now trading at 24x times 2025 earnings estimates of just over $11 per share, some skepticism remains priced in, especially around the pace of AI monetization. We continue to hold our position and collect the above-average dividend, viewing the pullback as more about cautious expectations than any breakdown in fundamentals.

T-Mobile US (TMUS): T-Mobile has once again reinforced its market leadership with a standout second quarter in 2025, decisively addressing prior concerns about growth momentum. The company achieved its best-ever Q2 for customer additions, leading the industry in bringing new customers to its network and expanding its overall connections to record levels. This robust customer expansion was marked by a significant increase in value per customer account, which grew over 5% year-over-year – the highest growth for TMUS in eight years – as customers increasingly chose more feature-rich and premium plans. This strong customer quality translated into impressive financial performance, with total service revenues growing 7% and postpaid service revenues increasing 9% annually, a rate more than double that of its closest competitors. The company reported its highest-ever quarterly net income, rising 10%, while operational profitability increased by 6%. Cash generated from daily operations surged 27%, and cash available after core investments reached a new Q2 record, demonstrating industry-leading efficiency in converting service revenue into usable cash. Confidently, management raised its full-year 2025 guidance across key metrics, anticipating continued strong customer additions, operational profitability, and cash flow, also noting a significant future tax benefit in 2026 due to recent legislation. T-Mobile’s strategic expansion continues with the recent completion of the Lumos fiber joint venture and the upcoming close of Metronet, projected to add substantial fiber customers this year. The planned acquisition of UScellular will further broaden network reach, particularly in smaller and rural areas, while a new partnership with cable operators extends mobile services into the small and mid-market business segment. Ongoing digital transformation, including the widely adopted T-Life app, and innovations like T-Satellite service, are enhancing customer experience and operational efficiency, showcasing T-Mobile’s commitment to sustained, profitable growth and extending its competitive edge.

Meta Platforms (META): Meta Platforms (META) delivered a blowout second quarter, significantly surpassing market expectations for both revenue and earnings and reaffirming its strong market position and AI leadership. The robust performance was driven by sustained user engagement, with users growing year-over-year, and strong monetization, as advertising revenue grew impressively, fueled by a substantial rise in ad impressions and average price per ad. This success is largely attributable to Meta’s deep integration of AI, which has demonstrably improved ad performance and user experience across its platforms, including a notable increase in ad conversions for advertisers utilizing AI-powered tools. While Reality Labs continues to operate at a loss due to long-term strategic investments in virtual and augmented reality, including AI glasses, the core apps continue to generate significant profits, affording the company the financial firepower for its ambitious AI initiatives, such as the development of personal superintelligence. Looking ahead, Meta provided an optimistic revenue outlook for Q3 and signaled substantial capital expenditures in 2026, reaching around $100 billion, to support its AI and infrastructure needs, with overall expense growth expected to accelerate. Shareholder returns remain a priority, as evidenced by significant share repurchases and an increased quarterly cash dividend. Analysts have reacted positively, raising their price targets, which aligns with Northlake’s conviction that Meta is exceptionally well-positioned for long-term growth and value creation through its leadership in AI and its expansive user base.

VICI Properties (VICI): VICI delivered another strong quarter in 2Q25, with results modestly exceeding expectations, reinforcing its position as a predictable and attractive investment in a volatile market. The company reported a 4.6% increase in total revenues and a notable 16.7% rise in net income, driven by the efficient flow-through of its business model and a favorable non-cash accounting adjustment. Adjusted Funds from Operations (AFFO) per share grew by nearly 5% year-over-year, a rate over five times higher than the average for net lease REITs. This strong growth is supported by robust internal growth from contractual rent escalations. Strategic activity included increasing its investment in One Beverly Hills and initiating a significant new partnership with Red Rock Resorts for the development of the North Fork Mono Casino & Resort. This marks VICI’s first collaboration with Red Rock, a major operator, and opens avenues for future opportunities, consistent with our view that VICI’s multiple is too low given its potential. The company also proactively refinanced existing debt approaching maturity, further protecting its compounding business model, and management highlighted the positive impact of new tax regulations encouraging tenants to invest further in properties. Looking ahead, VICI raised its full-year 2025 AFFO per share guidance to between $2.35 and $2.37, implying consistent year-over-year growth of 4.4% and cementing its path to a 10%+ annual total return for shareholders, further validating our investment thesis in this compounding machine.

Apple (AAPL): Apple delivered a surprisingly strong fiscal third quarter 2025, with revenue up 10% year-over-year to $94.0 billion and diluted earnings per share growing 12% to a June quarter record of $1.57, significantly exceeding analyst expectations. This performance was broad-based, driven by double-digit growth in iPhone, Mac, and Services, with expansion across nearly all geographic segments, including a return to growth in Greater China and strong performance in emerging markets. The company achieved record upgrade rates for iPhone, Mac, and Apple Watch, further expanding its active installed base to an all-time high, reinforcing its customer loyalty and competitive strength. Services revenue reached an all-time record, propelled by strong momentum in areas like advertising, the App Store, and cloud services, demonstrating robust monetization despite ongoing regulatory challenges. Management highlighted significantly accelerating investments in AI across capital expenditures and research and development, and reiterated plans for new Apple Intelligence features next year, aligning with our view of long-term growth upside. While tariff-related demand pull-forward accounted for a modest one percentage point of total revenue growth, mostly in iPhone and Mac within the U.S., tariff costs are expected to rise to $1.1 billion in the September quarter. Looking ahead, Apple forecasts mid-to-high single-digit revenue growth for the September quarter, with Services maintaining its strong growth trajectory. Reflecting its powerful cash flow profile, Apple returned over $27 billion to shareholders through dividends and share repurchases in the quarter, with analysts updating price targets to the mid-$200s. We continue to hold Apple shares, recognizing its robust cash generation and strong market position, while closely monitoring ongoing tariff and regulatory dynamics.

GOOG/GOOGL, IBM, TMUS, META, VICI, and AAPL are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts.  Steve is the sole proprietor of Northlake, a registered investment advisor.  Northlake’s regulatory filings can be found at www.sec.gov.