In a significant move reflecting the evolving landscape of technology and finance, WestPark Capital analyst Curtis Shauger initiated coverage on Alphabet Inc. (GOOG) with a Buy rating and a price target of $210 on Tuesday, April 1, 2025. This comes on the heels of Alphabet's fourth-quarter earnings report, which revealed net sales of $96.47 billion, marking an 11.8% increase compared to the previous year. However, this figure fell short of the consensus estimate that ranged from $96.56 billion to $96.69 billion.
Despite the revenue miss, Alphabet's GAAP earnings per share (EPS) reached $2.15, surpassing the consensus forecast of $2.12 to $2.13. The company's cloud revenue, although growing by 30% to $11.96 billion, also underperformed against the $12.19 billion consensus, leading to concerns about Alphabet's competitive position relative to Amazon Web Services (AWS) and Microsoft Azure.
In the fourth quarter, Alphabet reported an operating profit of $2.15 billion, translating to an 18% margin, which was above the anticipated $1.9 billion. Shauger underscored Alphabet's robust financial health, noting that the company generated over $70 billion in free cash flow in 2024, resulting in a net cash balance of approximately $85 billion. This financial strength positions Alphabet well to pursue growth opportunities, particularly in artificial intelligence (AI).
However, the slowdown in growth at Google Cloud Platform (GCP) has raised eyebrows among analysts. GCP's growth rate declined from 35% in the third quarter of 2024 to 30% in the fourth quarter. Shauger pointed out that although demand appears to be outstripping supply, the deceleration in growth has sparked concerns about the near-term trajectory of this critical segment.
On the earnings call, Alphabet announced initial capital expenditure guidance for 2025 of $75 billion, reflecting a 35% increase over 2024 and a staggering 150% increase from 2023. The upcoming trial concerning the Department of Justice's (DOJ) ruling that Alphabet maintained an illegal monopoly in search is set for April 2025, and Shauger indicated that the outcomes could significantly impact investor sentiment.
In related news, Piper Sandler released a report on the Consumer AI sector on the same day, predicting substantial growth in the coming years. The report, part of the Tech Decoded series, anticipates that 2025 will be a pivotal year for AI integration at the consumer level, particularly within the application layer. This follows a notable surge in data center infrastructure AI, as evidenced by NVIDIA’s impressive data center revenue, which soared to over $36 billion in the last quarter, a significant jump from $3.6 billion in the first quarter of 2023.
Piper Sandler projects that the Consumer AI market will grow at a compound annual growth rate (CAGR) of 46%, potentially exceeding $100 billion by 2030, up from $15 billion in 2025. The report highlights several public companies poised to benefit from this growth, including Amazon, Duolingo, Google, Meta Platforms, Microsoft, Opera, and Reddit. Duolingo, in particular, has demonstrated strong execution with a remarkable 40.84% revenue growth and 72.78% gross profit margins over the last twelve months.
Despite being valued at $14.05 billion, Duolingo appears overvalued according to InvestingPro’s Fair Value analysis. The report also profiles 13 private firms and lists 25 emerging AI companies worth monitoring. Established players in the market boast combined revenues of approximately $1.5 trillion, a market capitalization of around $8.2 trillion, and annual AI investments exceeding $100 billion.
In February 2025, the report provided a snapshot of the Consumer AI landscape, identifying the top 50 websites by monthly active users (MAUs), with ChatGPT, Discord, and Scribd leading the pack. Among mobile applications, ChatGPT and DeepSeek topped the download charts, followed closely by Duolingo and Gemini.
In light of Duolingo's strong performance, several analysts have raised their price targets for the company. DA Davidson increased its target from $400 to $410, maintaining a Buy rating based on robust user growth and positive enrollment data. Similarly, JPMorgan raised its target to $410, emphasizing the potential of Duolingo’s AI-driven product cycle, particularly the Max feature, which is expected to significantly enhance the subscriber base by 2025. Needham also raised its price target to $400, praising Duolingo for its impressive growth in daily active users and subscription bookings.
While established companies like Duolingo are capitalizing on AI advancements, Take-Two Interactive has taken a more cautious approach to AI integration in game development. During the 2025 Game Developers Conference, it was noted that while interest in AI is high, actual implementation in development processes remains minimal. A representative from NaturalMotion, a Take-Two subsidiary, emphasized the importance of prioritizing player experience over premature AI adoption, suggesting that widespread AI integration in game development may take more time.
In another realm of technology, new data from BrightEdge shared with Search Engine Journal indicates that Google’s AI Overviews (AIO) have rapidly expanded in size and are shifting how traffic is distributed across search results. In March 2025, Google expanded the pixel height of AIO by 18.26% in the first two weeks, with notable industry-specific increases: Travel (+39.49%), B2B Tech (+37.13%), Education (+35.49%), and Finance (+32.89%).
BrightEdge's findings reveal that 82.5% of clicks were directed to pages that were two or more clicks deep, while home pages accounted for less than 0.5% of all clicks. This shift indicates a growing preference for deeper, specialized content in AI citations, with 86% of cited pages ranked for only one keyword, often high-volume. The median keyword volume for citations was 15,300 monthly searches, with 19% of citation-triggering keywords exceeding 100,000 monthly searches.
Jim Yu, CEO of BrightEdge, emphasized the importance of full site indexing for optimizing visibility in AI-driven search results. He stated, "The data is from a combination of proprietary technologies... This allows us to present data in multiple ways and by various datasets based on the most up-to-date and relevant data on industry, personas, and intent within Google AIO and multiple AI engines."
As the landscape of AI continues to evolve, both Alphabet and companies within the Consumer AI space are at a critical juncture, navigating challenges and opportunities that could shape the future of technology and finance.
