Expect Solid Earnings From Alphabet. AI Search Is ‘Google’s War to Lose.’

Alphabet is expected to report second-quarter earnings later this month. (David Paul Morris/Bloomberg)

Alphabet shareholders fearing the end of Google’s search dominance just got some reassurance. Truist Securities offered an optimistic view on both the company’s coming quarterly results and its long-term prospects in the age of artificial intelligence.

Analyst Youssef Squali reiterated a Buy rating for Alphabet stock, sticking with a target of $200 for the price in a research note Wednesday. He forecast continued growth across Alphabet’s business units, including search.

The company is expected to report earnings for the quarter ended June 30 later this month.

Alphabet stock ticked up 1% to $177.61 on Wednesday, though it remains down 6.2% so far this year.

Investors have grown increasingly wary of Alphabet over the past year because artificial intelligence tools like Perplexity AI and OpenAI’s ChatGPT have begun to hoover up web traffic that used to go through traditional search engines. That is a problem because Google is by far the largest player in internet search and the advertising market that it facilitates.

Judges have ruled the company is a monopolist in both markets.

However, Squali expects year-over-year search revenue growth of 8% for the second quarter. That would be down slightly from 10% growth the prior quarter, but hardly an apocalyptic figure.

“We believe Google’s Search remains one of the most important customer acquisition and growth channels for most advertisers,” Squali wrote.

The analyst forecasts a similar deceleration in growth for the company’s YouTube advertising and cloud services segments. But, again, a slight slowdown isn’t something to sweat about, Squali argued, and Truist’s estimates for revenue and margins are more conservative than the Wall Street consensus.

A more pressing question is whether the company can remain the name in search as the way people use the internet continues to evolve. Here, too, Squali sees little reason for alarm.

Google still accounts for more than 90% of the internet search market, according to a May report from enterprise SEO company BrightEdge. And Google’s own AI tool Gemini is growing at a strong clip, Squali noted, which should serve the company well as AI search expands.

“AI Search remains Google’s war to lose,” Squali wrote.

Wall Street largely has remained bullish on Alphabet despite the stock’s rocky start to the year and growing cohort of competitors. Of the 72 analysts polled by FactSet, 60 have issued a Buy or Overweight rating, and the average target for the price is just below $200.

There are still dissenters, though. In a research note Wednesday, D.A. Davidson analyst Gil Luria argued the company should break up altogether.

Luria, who has been pressing for a breakup for months, believes the debate over search may continue to weigh on the stock for several quarters. Alphabet splitting up on its own terms, rather than awaiting potential sanctions from the Department of Justice after the antitrust rulings, would limit the damage to the business, Luria said earlier this year.

D.A. Davidson reiterated a Neutral rating and a $160 price target in Wednesday’s note. The firm said it would rate the stock as “the top mega cap pick if it proceeded with a complete break-up.”

Write to Nate Wolf at nate.wolf@barrons.com