Alphabet Relies on AI to Boost Search Growth: More Upside Ahead?

Alphabet’s GOOGL Search business is benefiting from AI infusion. The company is leading the search domain with 90.01% market share, followed by Microsoft’s MSFT Bing, with 4.98% share, Yahoo!’s 1.39%, Yandex’s 1.34%, DuckDuckGo’s 0.76% and Baidu’s BIDU 0.55%, per the latest data from StatCounter. 

Alphabet has been introducing AI-powered features frequently to boost user engagement of its Search business. The company integrated Gemini 3 directly into AI Mode in Search, which is driving engagement. Upgradation of AI Overviews to Gemini 3 is offering users a best-in-class AI response at the top of the search results page. GOOGL has made the transition from an AI overview to a conversation in AI Mode completely seamless. This is driving up user experience as well as engagement. 

In the United States, Alphabet saw daily AI Mode queries per user double since launch, and AI Overviews continue to perform very well. Queries in AI Mode are three times longer than traditional searches. The company is also seeing sessions becoming more conversational, with a significant portion of queries in AI Mode now leading to a follow-up question. Circle to Search is also now available on over 580 million Android devices.

Alphabet has introduced Personal Intelligence in AI Mode in Search (January 2026) and the Gemini app. GOOGL is now expanding Personal Intelligence in the U.S. across AI Mode in Search, the Gemini app and Gemini in Chrome. This is expected to improve user engagement, driving advertising revenues. In the fourth quarter of 2025, Search revenues increased 17% year over year.

GOOGL Faces Tough Competition

Microsoft is keeping no stone unturned to improve the capabilities of Bing. The company has been integrating AI into Bing thanks to its partnership with OpenAI. Copilot answers complex queries, and the launch of Bing Generative Search is improving query understanding, thereby driving user engagement. AI search is now embedded into Microsoft’s Edge browser and Windows ecosystem. These are expected to boost Microsoft’s Search market share over the long haul.

Meanwhile, Baidu has launched new AI-powered tools to support its search business. Its proprietary ERNIE (Enhanced Representation through Knowledge Integration) models improve the semantic understanding of queries and enhance retrieval accuracy, especially for complex queries. Baidu released an updated version of its omni-modal foundation model ERNIE 5.0 in January 2026 and restructured its model development organization into two dedicated teams to sharpen its application-driven AI strategy.

GOOGL’s Share Price Performance, Valuation & Estimates

Alphabet shares have dropped 7.1% year to date, underperforming the broader Zacks Computer and Technology sector’s decline of 6.1%.

GOOGL Stock’s Price Performance

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The GOOGL stock is trading at a premium, with a forward 12-month price/sales of 8.33X compared with the broader sector’s 5.83X. Alphabet has a Value Score of D.

GOOGL Valuation

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The Zacks Consensus Estimate for 2026 earnings is pegged at $11.60 per share, unchanged over the past 30 days, suggesting 7.3% growth from fiscal 2025’s reported figure.
 

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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