Can Alphabet's AI Innovation Help Google Search Regain Market Share?

Alphabet GOOGL has been dominating the search engine market for a long time, similar to what Microsoft MSFT enjoyed with Windows. However, GOOGL seems to have been losing some of its mojo in the search market due to growing usage of Generative AI applications, including Perplexity and Microsoft-backed Open AI’s ChatGPT, as well as stiff competition from traditional search engines, including Bing, Yandex, Yahoo!, DuckDuckGo and Baidu BIDU.

According to the latest data from StatCounter, Google had a market share of 89.54% in May 2025. In comparison, Bing and Baidu had market shares of 4% and 0.69%, respectively. Per Statista data, Google had a market share of 89.62% as of March 2025, the lowest over the past two decades.

However, Alphabet has been taking up initiatives to improve market share in Search through AI innovations. The addition of AI mode expands AI Overview’s advanced reasoning, thinking and multimodal capabilities. AI Overviews is driving a more than 10% increase in usage of Google for queries that support AI Overviews in Google’s biggest markets, like India and the United States. AI Overview is currently used by more than 1.5 billion people monthly. AI mode is now available in the United States. 

Circle to Search has been another key catalyst driving user engagement. At the end of the first quarter of 2025, Circle to Search was available on 250 million devices, with usage increasing roughly 40% during the quarter. 

Per our model, Google Search & other revenues are expected to see a CAGR of 11% between 2024 and 2027.

GOOGL Search Faces Stiff Competition From Microsoft Bing

Microsoft is keeping no stone unturned to improve the capabilities of Bing. MSFT has been integrating AI into Bing thanks to its partnership with OpenAI. The company introduced Copilot Search in Bing in April this year and launched Bing Video Creator on Monday. Bing Video Creator is powered by OpenAI’s Sora, which allows users’ text prompts to be converted into short videos.

Meanwhile, Baidu is leveraging self-developed ERNIE models to boost the potency of its Search engine. In March 2025, Baidu released ERNIE 4.5, which features multimodal capabilities and ERNIE X1, its first reasoning model. In April, Baidu launched ERNIE 4.5 Turbo and ERNIE X1 Turbo, which deliver improved performance at a much lower cost.

GOOGL’s Share Price Performance, Valuation and Estimates

Alphabet shares have dropped 11.2% year to date (YTD), underperforming the broader Zacks Computer & Technology sector’s return of 0.1% and the Zacks Internet Services industry’s decline of 9.1%.

GOOGL’s Performance

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Alphabet stock is trading at a premium, with a forward 12-month Price/Sales of 6.03X compared with the industry’s 5.05X. GOOGL has a Value Score of C.

GOOGL Valuation

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The Zacks Consensus Estimate for second-quarter 2025 earnings is pegged at $2.12 per share, unchanged over the past 30 days, indicating 12.17% year-over-year growth. 

The consensus mark for 2025 earnings is pegged at $9.47 per share, up by a nickel over the past 30 days, suggesting 17.79% year-over-year growth.

Alphabet currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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This article originally published on Zacks Investment Research (zacks.com).

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