Alphabet's search slowdown puts focus on AI returns
Alphabet's slowing search advertising growth and rising AI spending overshadowed a surge in cloud revenue. Shares fell 10.3% in premarket trading as analysts questioned when AI investments will pay off.
1. Search growth and AI costs
Alphabet's slowing search advertising growth and rising AI spending overshadowed a surge in cloud revenue, highlighting the mounting costs of its AI push. Its shares fell 10.3% in premarket trading.
2. Analysts assess AI returns
D.A. Davidson said significantly higher capital spending and funding needs through 2027 could weigh on the stock in the near term. Morgan Stanley said execution on AI-powered search and new products will matter more to the stock's outlook than monetizing TPU infrastructure.
3. Search monetization concerns
Pivotal Research said search growth is likely to slow further as AI agents gain traction, while Alphabet's scale, cloud momentum and AI monetization opportunities should help offset pressure on advertising. Piper Sandler said concerns about lower monetization of AI-powered search could persist until there is clearer evidence of stabilization, despite strong AI engagement and cloud demand.
