Alphabet Faces Pivotal Year in 2025 Amid AI Competition and Search Challenges
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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.
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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
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Google's parent company Alphabet is entering a crucial phase in 2025, balancing AI advancements against potential search disruption risks. Analysts see this as a defining moment for Google's position in the AI race and its core search business.
Alphabet's Pivotal Year Ahead
As 2025 approaches, Alphabet, Google's parent company, finds itself at a critical juncture in the rapidly evolving landscape of artificial intelligence and search technology. Bank of America analysts have highlighted 2025 as a "pivotal year" for the tech giant, which could either cement Google's position as an AI leader or expose it to increased search disruption risks
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.Stock Performance and Analyst Outlook
Despite facing challenges, Alphabet's stock has shown resilience, surging 35% in 2024 and outperforming the S&P 500
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. Bank of America Securities analyst Justin Post maintains a Buy rating on Alphabet, raising the price target to $225 from $2102
. This positive outlook is attributed to new product launches, strong cost discipline, improving Cloud growth, and positive estimate revisions.AI Advancements and Search Competition
Google's efforts to bolster its position in the AI arms race come amid growing competition from rival search platforms powered by generative AI
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. The company's potential positives include increasing usage of AI overviews and new ad opportunities around informational queries. However, the threat of disruption from emerging Generative-AI search platforms remains a concern2
.Legal Challenges and Market Position
A significant headwind for Alphabet is the recent ruling by a judge that Google had illegally stifled competition to become the world's default search engine
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. This legal challenge has weighed on Alphabet's multiple versus its peers and could potentially impact the company's dominant market position.Related Stories
Financial Performance
Despite these challenges, Alphabet reported strong third-quarter results in October 2023, surpassing Wall Street estimates. The company's earnings of $2.12 per share on revenue of $88.27 billion exceeded expectations
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. Notably, advertising revenue rose to $65.85 billion, with YouTube ad revenues increasing to $8.92 billion. Google Cloud division also showed impressive growth, with revenue jumping 35% year-over-year to $11.35 billion1
.Looking Ahead
As Alphabet navigates this crucial period, analysts are closely watching several factors that could influence the company's future. These include the potential for AI-driven performance to drive multiple expansion, possible changes in the Search case trajectory under a new administration, and increasing value contribution from the cloud business
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. The appointment of a new CFO also raises the possibility of new disclosures or cost-cutting measures.In conclusion, 2025 stands as a defining year for Alphabet, with the potential to either solidify its leadership in AI and search or face increased disruption risks. The tech giant's ability to innovate, adapt to regulatory challenges, and maintain its competitive edge in the face of emerging AI technologies will be crucial in shaping its future in the rapidly evolving digital landscape.
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