Alphabet Faces Pivotal Year in 2025 Amid AI Competition and Search Challenges

Alphabet faces "pivotal" 2025 amid AI, search competition, BofA says By Investing.com

Investing.com - Google-owner Alphabet (NASDAQ:GOOG) faces a "pivotal" year in 2025 as the tech giant attempts to bolster its position in the artificial intelligence arms race and combat headwinds to its key search business, according to analysts at Bank of America (NYSE:BAC). In a note to clients upgrading their price target for the stock to $225 from $210, the analysts noted that Alphabet's stock price surged by 35% in 2024, buoyed by new product launches which helped offset concerns around the impact of growing AI players on its search operations. Still, they flagged that the threat from rival search platforms powered by generative AI remains, while a ruling by a judge last year that Google (NASDAQ:GOOGL) had illegally stifled competition to become the world's default search engine has weighed on Alphabet's multiple versus its peers. "With search still far overshading value of other businesses, we view 2025 as a pivotal year, which could help establish Google as either an Al leader [...] or see elevation in search disruption risk," the BofA analysts said. The comments come after Alphabet reported third-quarter results in October that topped Wall Street estimates thanks to an uptick in advertising revenue that helped assuage some concerns around the threat of competition from AI search products. The company reported earnings of $2.12 per share on revenue of $88.27 billion, compared with expectations for $1.84 and $86.37 billion, respectively. Advertising revenue rose to $65.85 billion in the third quarter from $59.65 billion in the prior-year period, with ad revenues at its YouTube video service in particular increasing to $8.92 billion from $7.95 billion. Revenue at its Google Cloud division jumped 35% year-over-year to $11.35 billion from $8.41 billion, also above consensus estimates.

Google Stock Boosted By AI Growth, Cloud Expansion, Cost Discipline Despite DOJ And Generative AI Challenges: Analyst - Alphabet (NASDAQ:GOOGL)

Analyst sees 2025 as pivotal for Google's AI leadership or risk of search disruption, with ad opportunities and AI overviews boosting growth Bank Of America Securities analyst Justin Post maintained a Buy rating on Alphabet Inc GOOG GOOGL Google with a price target of $225, up from $210. In 2024, Alphabet stock (up 35%) outperformed the S&P 500 (up 23%) and benefited from new product launches offsetting Al concerns (OpenAI traction), strong cost discipline, improving Cloud growth and positive estimates revisions. However, the threat of disruption from emerging Generative-Al search platforms and adverse judgment in the DOJ search case weighed on multiple versus FANG peers. Also Read: Samsung's Outlook Dims Amid HBM Supply Struggles for Nvidia and Sluggish Consumer Chip Sales With search still far outpacing the value of other businesses, Post noted 2025 as a pivotal year, which could help establish Google as either an Al leader (via AI Overview traction) or elevate search disruption risk. Google's potential positives include growing usage of AI overviews and new ad opportunities around informational queries, greater appreciation of AI assets and AI-driven performance driving multiple expansion, potential for change (or settlement) in Search case trajectory under new administration, increasing value contribution from cloud business, and new disclosures or cost cuts under new CFO. However, Post lowered estimates for recent US dollar appreciation and lowered 2025 EPS to below-Street $8.78 (from $8.96). The price target boost reflects 2026 GAAP EPS of $10.06 (versus $10.31 previously) and a lower 21x multiple (versus 22x previously), plus cash. Price Action: GOOGL stock is up 0.04% at $191.16 at last check Tuesday. Also Read: Micron's $7 Billion Bet on AI-Driven Memory In Singapore Facility Set to Boost Innovation Photo: Shutterstock GOOGLAlphabet Inc$189.67-0.70%Overview Rating:Good62.5%Technicals Analysis1000100Financials Analysis400100WatchlistOverviewGOOGAlphabet Inc$190.97-0.69%Market News and Data brought to you by Benzinga APIs