This Is Google's Secret Weapon To Outpace ChatGPT In Search War

Citizens JMP analyst Andrew Boone upgraded Alphabet GOOGL GOOG from Market Perform to Market Outperform with a price forecast of $220 on Thursday.

Boone’s upgraded outlook is primarily driven by the belief that Artificial Intelligence (AI) will serve as a net tailwind for Google. He argues that the impact of ChatGPT on diverting search queries away from Google is currently negligible and insufficient to materially affect its results.

Conversely, AI is seen as expanding Google’s search opportunities by addressing a broader range of queries and enhancing monetization through improved inference of user intent.

Also Read: Google Future Divides Wall Street As AI Hype Meets Skepticism

A key part of Boone’s analysis centers on Google’s AI advancements. He highlights that OpenAI’s platforms currently boast 800 million weekly active users, significantly less than Google’s reported 5 billion+ active users.

Google’s AI Overviews, which became generally available in the U.S. in May 2025, has already demonstrated a 10% query growth in testing.

Boone projects that AI Overviews will expand from 1.5 billion monthly users in the first quarter of 2025 to 4 billion by the third quarter of 2025, eventually covering approximately two-thirds of all queries by the next quarter.

Assuming Google maintains this 10% query growth as AI handles a wider array of questions and delivers better answers, Boone anticipates a mid-single-digit query growth tailwind for Google in the third quarter of 2025.

While ChatGPT does offset some of this growth, Boone estimates its subscriber base to be only 20 million in the second quarter of 2025, based on OpenAI’s reported $10 billion Annual Recurring Revenue (ARR) as of June 2025.

He suggests that negative query growth is most severe for these subscribers, implying that AI Overviews’ wider distribution will accelerate Google’s overall query growth in the second and third quarters of 2025. Essentially, AI is increasing overall search usage faster than ChatGPT is capturing market share.

Boone is particularly optimistic about Google’s Smart Bidding Exploration and AI Max for Search Campaigns. These tools enable advertisers to move beyond keyword bidding and focus on the intent behind a query, allowing Google to commercialize more than the historical ~20% of monetizable searches. This, combined with increased confidence in query growth, leads Boone to project an acceleration in Google’s search revenue growth for the second and third quarters of 2025.

For the second quarter of 2025, Boone has adjusted his revenue forecast for Alphabet to $79.9 billion (up from $78.9 billion) and EPS to $2.16 (up from $2.11).

The analyst previously downgraded Google due to potential antitrust penalties, specifically concerning the possibility of a judge disallowing Google’s payments to Apple Inc. AAPL. Given that over 50% of U.S. queries run through Apple devices, such a ruling could significantly impact Google’s distribution.

Boone had previously quantified this potential impact as a two-turn effect on shares, considering both the potential for users to switch back to Google and a reduction in Traffic Acquisition Costs (TAC).

However, he now notes that Alphabet’s shares are trading two turns lower than at the time of his January downgrade, suggesting this potential risk has been largely priced into the stock. Consequently, he upgraded the shares ahead of the court’s decision.

Price Action: GOOGL stock is trading higher by 0.46% to $174.33 at last check Friday.

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