Why Alphabet (GOOGL) Shares Are Falling Today

What Happened?

Shares of online advertising giant Alphabet (NASDAQ:GOOGL) fell 3% in the morning session after a federal judge ruled that the company monopolized online advertising technology. The affected technologies were the publisher ad servers and exchanges. These platforms are central to how digital ads are bought, sold, and placed across the internet, and they have been major revenue drivers for Alphabet. The decision raised the possibility that the company could be forced to divest these assets, potentially weakening its control over digital ad infrastructure and creating new growth opportunities for independent ad tech firms.

The shares closed the day at $151.20, down 1.4% from previous close.

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What The Market Is Telling Us

Alphabet’s shares are extremely volatile and have had 34 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.

The biggest move we wrote about over the last year was 2 months ago when the stock dropped 8.7% on the news that the company reported underwhelming fourth-quarter 2024 results. Its total revenue was in line and its Google Cloud revenue missed, spooking some investors who had high expectations. Given the secular trends surrounding Google Cloud along with its long-term profit margin potential, it was increasingly a sharp focus of investors and the market. 

We note that Microsoft's Azure division also posted worse-than-anticipated results, signaling the market was overly optimistic about cloud computing for Q4. 

On the brighter side, advertising revenue slightly exceeded expectations, driven by strong contributions from both Search and YouTube. It was also encouraging to see Alphabet beat analysts' operating income expectations. 

In AI, the company earmarked $75 billion for capital expenditures in 2025, well ahead of Wall Street's estimates. It also rolled out its latest AI model, Gemini 2.0, to the public, aiming to expand its reach and stay competitive with rivals. Zooming out, we think this was a mixed quarter with areas of underperformance weighing on shares that had made 52-week highs right before this earnings announcement.

Alphabet is down 20.2% since the beginning of the year, and at $151.24 per share, it is trading 26.7% below its 52-week high of $206.38 from February 2025. Investors who bought $1,000 worth of Alphabet’s shares 5 years ago would now be looking at an investment worth $2,365.

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