Is Alphabet’s Search Risk Really Priced In? Stress-Testing Rosenblatt’s $410 Thesis

Alphabet’s recent financial performance has sparked debate among analysts about whether concerns over AI chatbots disrupting Google’s traditional search dominance have been overstated or simply repositioned. The numbers suggest that the search business is still growing, but at a slower pace than previously seen.

Google Search & other revenue grew 17% year over year to $63.3 billion in the second quarter of this year. While this figure may seem impressive, it’s actually a slight drop from the previous quarter’s growth rate of 19%. Furthermore, search revenue has been steadily increasing since 2025, but this recent slowdown is likely to be scrutinized by investors.

The argument that Google’s search business is slowing down isn’t necessarily about current numbers, but rather about what comes next. As AI chatbots continue to gain traction, the question on everyone’s mind is whether they’ll eventually cannibalize Google’s traditional search revenue. The company has been expanding its ecosystem with features like AI Mode and Gemini, which have seen significant growth in recent months. However, this doesn’t necessarily mean that search is immune to disruption.

Google’s Cloud revenue surged 82% year over year to $24.8 billion, with segment operating income more than tripling from $2.8 billion to $8.8 billion. This suggests a strong foundation for future growth, but it doesn’t address the core concern: will Alphabet’s search business be able to adapt and evolve in response to changing user behavior?

Rosenblatt’s recent thesis posits that Cloud will be a key driver of Alphabet’s growth, supporting a new leg of multiple expansion. While this might seem like a safe bet, it’s worth considering whether the company is simply delaying its reckoning with the search disruption threat.

In other words, has Google been too focused on finding ways to monetize its existing search business, rather than fundamentally rethinking how it approaches search in the age of AI? The answer lies not just in the numbers, but also in the company’s willingness to innovate and adapt to changing user needs.

The stakes are high for Alphabet’s future growth prospects. If Google can successfully navigate this transition, it may emerge even stronger, with a diversified revenue stream that insulates its search business from disruption. But if it fails, the consequences could be severe – not just for investors, but also for users who rely on Google’s search capabilities.

The next few quarters will be telling in determining whether Alphabet’s risk narrative has been overstated or simply repositioned. Will Google be able to continue to innovate and adapt, or will it struggle to keep pace with the rapid changes taking place in the tech landscape? One thing is certain: only time will tell if Alphabet can truly put its search risks behind it.