Judge Allows Antitrust Suit Over Google’s Exclusive Search Deals to Proceed
Judge Rita Lin ruled that consumers plausibly allege Google maintained a search monopoly through exclusive default-search deals since 2017, allowing Section 2 Sherman Act and California unfair-competition claims to proceed. The allegations, based on DOJ findings about traffic steering payments, sustain substantial litigation risk to Alphabet’s search-ad revenue model.
1. Gemini’s Integration Fuels Search Usage
Gemini has become a leading generative AI model with deep integration into Google Search and other core services. Since its wide rollout in early 2025, Gemini-powered AI overviews have appeared atop billions of daily search queries, enabling Alphabet to gather performance data at scale. In Q4, internal metrics show a 40% increase in AI-driven search engagement versus Q3, and over 500 million unique users have accessed AI features in Gmail, Photos and Workspace. This broad adoption positions Gemini to drive both higher user retention and incremental ad revenue as artificial-intelligence–enhanced results boost click-through rates by an estimated 12 percentage points compared with traditional listings.
2. Google Cloud’s Rapid Growth and Margin Expansion
Google Cloud posted 34% year-over-year revenue growth in Q3 2025, reaching roughly $22 billion in trailing-twelve-month sales, and advanced its operating margin from 17% to 24% over the same period. Enterprise customers have increased AI workloads on Cloud, with AI services now representing nearly 30% of division revenue, up from 18% a year earlier. Contract backlog stands at $15 billion, and management forecasts AI infrastructure demand will drive at least 30% cloud revenue growth in Q4. As Google Cloud scales, its improving unit economics—supported by custom Tensor Processing Units and efficient data-center deployment—will contribute meaningfully to Alphabet’s overall profitability and reduce reliance on ad sales.
3. Advertising Business Remains Resilient
Alphabet’s legacy ad-supported services continue to show durable strength, with Q3 ad revenues rising 16% year-over-year to more than $60 billion. YouTube ad sales grew 20%, benefitting from expanded shopping integrations and premium subscriptions, while search-network ad clicks increased 14%. Average cost per click remained stable, down just 1% sequentially despite seasonally softer demand, reflecting robust pricing power. Wall Street consensus anticipates 15% overall revenue growth and 24% EPS growth for Q4, driven by sustained ad performance and ongoing monetization of AI-driven features that deliver higher engagement and yield per user.