In a high-stakes antitrust trial that could reshape the landscape of online search, Google is facing significant scrutiny over its market dominance. The trial, which concluded its sessions on Friday, has revealed critical insights into how the tech giant is strategizing to address potential changes proposed by the U.S. Department of Justice (DOJ).
Liz Reid, Google's head of research, testified on Tuesday, May 6, 2025, indicating that the company might need to transfer between 1,000 and 2,000 employees—approximately 20% of its research team—to implement some of the DOJ's proposed measures. This testimony was corroborated by a source familiar with the proceedings, as reported by CNBC.
This trial is pivotal as it seeks to determine the penalties against Google after a judge ruled last year that the company was engaging in illegal monopolistic practices in its primary search market. The DOJ, which initiated the antitrust lawsuit and presented the proposed changes, is pushing for Google to share the data it uses to generate search results. Additionally, the DOJ has requested that Google cease its practice of "exploitative advertising"—a strategy that ensures its search engine remains the default option on various browsers and smartphones.
For instance, Google pays Apple billions of dollars annually to maintain its status as the default search engine on iPhones. This arrangement is not only lucrative for Apple but also serves as a vital means for Google to increase its search volume and user base. However, reports suggest that the DOJ has also proposed that Google abandon its Chrome browser, although this was not included in the initial calculations presented by Reid.
The closing arguments for this antitrust trial are scheduled for May 29 and 30, with a ruling from the judge expected in August. Meanwhile, Google is also gearing up for a separate antitrust trial regarding its advertising technology, set to commence on September 22.
In the backdrop of these legal challenges, Alphabet, Google's parent company, has faced mounting pressure from investors since the launch of ChatGPT. Concerns have been raised regarding Alphabet's ability to maintain its market position, significantly affecting stock confidence and raising questions about the company's future profitability.
This week, Alphabet's shares took a notable hit, with a market value drop of approximately $138 billion amid fears surrounding its competitive edge in the search market. The stock plummeted nearly 7% by the end of the week, contrasting sharply with a minor decline of just 0.2% for the Nasdaq 100 index.
According to Bloomberg, this downturn followed testimony from Apple executive Eddy Cue, who indicated that the company is considering integrating artificial intelligence services into its Safari browser—currently powered by Google under a lucrative $20 billion annual contract. Cue revealed that search activity on Safari had decreased for the first time in years, highlighting the emerging competition from AI-driven search tools like those from OpenAI and Anthropic.
Market strategist Art Hogan from B. Riley Wealth Management expressed significant concerns, stating, "We do not know the volume of losses it may incur, or the extent of that, this makes it difficult to assess the value of the stock based on future profits."
Despite the challenges, many analysts remain cautiously optimistic about Alphabet's stock. More than 80% of analysts surveyed by Bloomberg maintain a "buy" rating for the company, although this figure is lower than similar ratings for competitors like Microsoft, Amazon, and Meta, which boast over 90% buy ratings.
Alphabet's shares closed trading on May 7, 2025, at 15 times the expected earnings for the upcoming year, a stark contrast to the historical average of 21 times over the past decade. For comparison, Microsoft trades at about 30 times expected earnings, reflecting a widening gap in investor confidence.
However, analysts warn that the current expectations for a projected net income of $115 billion in 2025 might be overly optimistic. Ben Reitzes from Melius noted that trends observed in April indicate a potential decline in the number of paid clicks, a crucial revenue source for the company.
Furthermore, Alphabet still commands a significant market share in search, holding 89.7% as of March, down from 92.9% in January 2023—just two months after the launch of ChatGPT. This decline has raised alarms among investors, particularly as competitors like Microsoft's Bing, which utilizes AI tools, have started to capture a portion of Google's market share.
In response to concerns about its declining dominance, Google has emphasized that its overall search volume continues to grow. The company noted an increase in inquiries from Apple devices, asserting that users are not abandoning its search engine but are instead exploring new methods, such as image searches with Google Lens and voice searches.
As the antitrust trial unfolds and the competitive landscape continues to evolve, the implications for Google and Alphabet are profound. The outcome could redefine not only the company's operational strategies but also the future of online search and advertising.
With the legal proceedings set to continue, stakeholders are left to ponder the potential shifts in market dynamics and what this means for the tech giant's long-term viability.