Alphabet Focuses on AI to Boost Search Growth: More Upside Ahead?

Alphabet’s GOOGL Search business is benefiting from AI infusion. The company is leading the search domain with 90.4% market share, followed by Microsoft’s MSFT Bing, with 4.08% share, Yandex’s 1.65%, Yahoo!’s 1.46%, DuckDuckGo’s 0.87% and Baidu’s BIDU 0.75%, per the latest data from StatCounter. 

Alphabet has been introducing AI-powered features frequently to boost user engagement of its Search business. GOOGL recently introduced two new features in Search and Discover. One of the AI-powered features helps Discover users stay up to date on the latest happenings and trending topics. The feature is now available in the United States, South Korea and India. Search users can now keep up with the latest sports information thanks to the second feature. Alphabet is bringing Nano Banana to Google Search.

Alphabet is advancing visual and contextual search capabilities. The Circle to Search feature is now active on more than 300 million devices. The company is adding functionalities to help people explore complex topics and ask follow-up questions without switching apps. AI Overviews now reach more than 2 billion users per month and are available in over 200 countries across 40 languages. Google’s AI-powered Search features are driving deeper engagement, with AI Mode offering advanced reasoning and multimodal responses.

Google’s AI-powered Search features are driving deeper engagement, with AI Mode offering advanced reasoning and multi-modal responses. Users are generating queries twice as long as those in traditional searches. The launch of AI Mode in the United States and India, where it currently has more than 100 million monthly active users, is expected to drive growth. GOOGL is expanding AI mode in Google Search by adding more than 35 languages and above 40 new countries and territories. AI Mode in Search is now expanded to more than 200 countries and territories.

GOOGL Faces Tough Competition

Microsoft is keeping no stone unturned to improve the capabilities of Bing. MSFT has been integrating AI into Bing thanks to its partnership with OpenAI. The company introduced Copilot Search in Bing in April this year and launched Bing Video Creator in June. 

Meanwhile, Baidu has launched new AI-powered tools to support its search business. Baidu introduced an advanced video generation model that transforms still images into dynamic clips. BIDU’s search box now accepts up to 1,000 Chinese characters, far surpassing the previous 28-character limit.

GOOGL’s Share Price Performance, Valuation & Estimates

Alphabet shares have appreciated 32.9% year to date, outperforming the broader Zacks Computer and Technology sector’s return of 22.9%.

GOOGL Stock Outperforms Sector

The GOOGL stock is trading at a premium, with a forward 12-month price/sales of 8.27X compared with the broader sector’s 6.88X. Alphabet has a Value Score of D.

GOOGL Valuation

The Zacks Consensus Estimate for 2025 earnings is pegged at $9.93 per share, down 3 cents over the past 30 days, suggesting 23.5% growth from fiscal 2024’s reported figure.
 

Alphabet Inc. Price and Consensus

Alphabet Inc. price-consensus-chart | Alphabet Inc. Quote

Alphabet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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