Citizens Downgrades Alphabet to Market Perform

Citizens analyst Andrew Boone downgraded Alphabet (NASDAQ: GOOGL) from Market Outperform to Market Perform.

“We are downgrading Alphabet to Market Perform from Market Outperform after search growth slowed by ~5 points from 2Q to 3Q.

While query growth reached a five-year high, monetization appears to be challenged while search faces difficult comps.

While we acknowledge Google is well-prepared to offer an agentic experience, it will take execution to effectively transition monetization from AI Overviews to agents, and it expects to launch a consumer agent by year-end.

While we had identified this risk previously (note here), the slowdown in search surprised us this quarter as we thought Google was capturing more of the benefit of an expanding search market from AI, giving it more runway to make this transition.

With greater competition from agents, which we view as the future gateway to the internet (replacing the browser or search), Google has significant execution risk ahead as it transitions search monetization.

While we remain positive on Cloud, search is the better business and drives Google’s premium multiple; therefore, we believe the risk/ reward is balanced at current levels.”

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