Alphabet Inc's (NASDAQ:GOOGL) Google dominates commercial queries, while AI search accounts for only around 1% of total referral traffic and an immaterial percentage of conversions, according to Truist Securities.
The Alphabet Analyst: Analyst Youssef Squali maintained a Buy rating, while raising the price target from $225 to $285.
The Alphabet Thesis: Google continues to dominate the Search space, with over a 90% share of Search advertising, even with new GenAI platforms like ChatGPT and Perplexity grow their user base and usage, Squali said in the note.
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During the company's latest (second quarter) earnings call, CEO Sundar Pichai reported year-on-year growth in both overall queries and commercial queries on search, while indicating that new AI features were helping drive that growth, he added.
"A look at current growth in online Search volume and use cases suggests that the advent of AI chatbots is expanding Search’s TAM (total addressable market), not cannibalizing it," the analyst wrote.
While the rise of GenAI has led to a deceleration on click and impression volume growth, Google's year-on-year revenue growth "has remained robust" and in the low double-digits, reflecting pricing improvements, he further stated.
GOOGL Price Action: Shares of Alphabet had declined by 0.15% to $254.35 at the time of publication on Monday.
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