Alphabet sheds $500 bln in market value as stock heads for worst day ever

Shares of Google parent Alphabet fell 13% in early trading on Thursday, which wiped a record $500 billion from its market value, the Financial Times reports. The stock is heading for its worst day since the company went public in 2004, Yahoo Finance notes.

The market was reacting to the company’s third-quarter earnings report, released after Wednesday’s market close. The Google owner reported spending more cash than it generated last quarter and acknowledged that AI Mode searches were threatening the profitability of its core advertising business. The company’s massive AI investments were also scrutinized.

Citizens: Citizens downgraded Alphabet to “market perform” from “market outperform,” CNBC reports. “While query growth reached a five-year high, monetization appears to be challenged while search faces difficult comps,” Citizens analyst Andrew Boone wrote in a note to clients. In his view, Google is well prepared to offer services powered by AI agents, but effectively shifting monetization from AI Overviews in search results to agents will require strong execution. The management expects to launch a consumer AI agent by the end of the year.

BofA: The bank maintained its “buy” rating on Alphabet but cut its target price to $380 from $430 per share, implying 17% upside from Wednesday’s close. BofA estimates that Alphabet’s year-over-year search revenue growth, excluding currency effects, slowed by 3 percentage points in the third quarter versus the previous quarter. That partly reflected a tougher comparison base, even as year-over-year growth in search queries accelerated, BofA noted. “Google indicated traffic transition to Overviews was a small headwind in the Q, and likely bigger in Intl markets where ad loads are just starting to ramp. Tougher comps continue through 2Q′27, which could make Google a 2H′27 story,” BofA wrote. However, with ads in AI Overviews launching internationally this quarter, better AI models being deployed, and the company reporting that those ads are performing well, the bank sees potential for search revenue growth to accelerate as early as the first quarter of 2027.

BMO: The bank maintained its “outperform” rating but lowered its TP on Alphabet to $425 from $480 per share, implying 31% upside. “While Search revenue was soft, Search queries grew at the fastest YoY rate in 5 years, as GOOGL expands AI Mode globally and underscores its belief that most AI Mode searches are incremental,” the house noted. In other words, BMO believes AI search is generating additional queries rather than taking them away from traditional search.

UBS: The bank, which has a “neutral” rating on Alphabet, cut its TP to $332 from $380 per share, implying just 2.2% upside. Search revenue last quarter totaled $63.4 billion versus the $64.9 billion consensus estimate, while YouTube generated $11.2 billion versus expectations of $11.4 billion, UBS noted. Beyond the unexpectedly weak results in these businesses, it said Google’s management struck a cautious tone on how quickly the company could monetize additional AI Mode queries. This, UBS wrote, “suggests a lower ad revenue growth trendline than we had anticipated.”

Despite the disappointing earnings, “buy” remains the most common Wall Street recommendation on Alphabet, given by 65 of the 72 analysts covering the stock. The other seven have “hold” ratings.

Search advertising revenue, Alphabet’s largest source of sales, grew 12% year over year to $63.35 billion in the third quarter but missed analysts’ expectations, adding to pressure on the stock, CNBC reports. Philipp Schindler, Alphabet’s chief business officer, attributed some of the weakness in search to lower monetization in AI Mode. He added that the company is scaling up ads in AI Overviews and AI Mode, including internationally.

Google’s search business faces headwinds from the rise of AI chatbots such as OpenAI’s ChatGPT and Anthropic’s Claude, as users may increasingly be searching for information outside of Google. Meanwhile, the company’s own chatbot, Gemini, has failed to keep pace with competitors, CNBC notes.