Key Highlights

  • Evercore ISI's Mark Mahaney said on Sept. 22 that Google Search is strengthening and that Gemini is within about three points of ChatGPT on consumer preference for AI agents.
  • Q2 Revenue rose 24% to $119.8 billion, with Google Cloud up 82% to $24.8 billion and Search up 17%.
  • Q2 capex of $44.9 billion, negative free Cash Flow and an $84.75 billion Equity raise are the main cost trade-offs.
  • Alphabet's two share classes together make up nearly 10% of the Nasdaq-100, with GOOGL at about 5.10% and GOOG at about 4.76%; Class A shares traded near $351.16 in the latest session.

Alphabet (NASDAQ:GOOGL) could recover if investors come to believe that Google Search, its main profit engine, is holding up against generative AI rivals. That is the case Evercore ISI analyst Mark Mahaney made in comments on Sept. 22. He said Google's search position "seems to be strengthening" and that Gemini is now within roughly three percentage points of ChatGPT when consumers are asked about AI agents.

The comments come after a difficult stretch for the stock. Alphabet had just wrapped up its longest monthly losing streak in more than a decade on Sept. 2, a period in which Google lost some momentum in the AI model race, saw high-profile talent departures and restructured DeepMind. Class A shares closed at $351.16 on Sept. 22, down about 1.1% on the day.

Together, Alphabet's two share classes make up nearly 10% of the Nasdaq-100: GOOGL at about 5.10% and GOOG at about 4.76%. That combined weight means a rebound, or a further slide, would carry through to the broader index.

Why Evercore Sees Search Regaining Ground

Mahaney's argument starts with how much the company depends on search. By his estimate, Search accounts for more than half of revenue and more than 70% of profits. "If there's a problem with Google Search, there's a problem with Google stock," he said.

He said Google lost share as consumers turned to OpenAI's ChatGPT through early 2025, but that the company has since improved its search product and regained ground. He also pointed to Google's strength in commercial queries tied to travel, restaurants and other purchase decisions, which support Advertising revenue. He cautioned that Leadership could shift again as both companies keep improving their products.

Mahaney identified three potential product cycles: an improved Gemini Spark offering as Meta Platforms (NASDAQ:META) steps up its AI launches, a next-generation Gemini 4 frontier model he expects later this year, and wider adoption of Google's tensor processing units. Evercore's price target implies roughly 30% upside. Mahaney also said AI companies need strong safeguards as their models become more powerful, and that he expects Google to keep a safety-focused approach as it releases future Gemini products.

Early-September Catalysts and a Legal Win

Several developments in early September improved the setup. Google launched Gemini 3.8 Flash, its third Flash model in six weeks, which it called its best reasoning and coding model yet, along with a Cybersecurity model for government and enterprise customers. Berkshire Hathaway (NYSE:BRK.B) CEO Greg Abel also publicly expressed confidence in Alphabet's AI position.

On the same day, a federal judge rejected the Justice Department's push to force Google to sell its ad exchange, another victory for the company in the government's antitrust efforts. Even so, the stock's initial response was muted, rising 0.6% that day after falling more than 1% the day before.

Cloud Surge Drives the Numbers

Alphabet's fundamentals have held up better than its share price. For the second quarter, reported on Jul. 22, revenue rose 24% to $119.8 billion, ahead of the $116.93 billion analysts expected. Google Cloud revenue jumped 82% to $24.8 billion, and Cloud Operating Income reached $8.8 billion, up from $2.8 billion a year earlier. The acceleration has been steep: Cloud growth went from 48% in the fourth quarter of 2025 to 63% in the first quarter of 2026 and 82% in the second quarter.

Google Services revenue grew 15% to $94.5 billion, including a 17% increase in Search and other revenue to $63.3 billion and a 13% rise in YouTube advertising to $11.1 billion. Operating income rose 30% to $40.8 billion, lifting the Operating Margin to 34%. Net Income of $112.1 billion, or $9.11 per diluted share, was inflated by a $99.0 billion net gain, mainly unrealized gains on equity securities.

"Our AI investments are redefining what's possible across every part of our business," Chief Executive Officer Sundar Pichai said, adding that nearly 90% of the Fortune 100 use Gemini Enterprise. The company also declared a quarterly Dividend of $0.22 per share for all share classes, which was paid on Sept. 14.

Competing for AI Users and Enterprise Budgets

The consumer race with ChatGPT is only part of the picture. D.A. Davidson analyst Gil Luria, who has a neutral rating on the stock, said Gemini 3.8 Flash "seems to keep Google in the race" but that Google is probably still "a distant third" in the enterprise market behind Anthropic and OpenAI. Meta's AI product push adds another rival for consumer attention. On the infrastructure side, Google's TPUs give it a custom-chip alternative to Nvidia (NASDAQ:NVDA) hardware, which Mahaney sees as a growth opportunity in its own right.

Spending, Dilution and Other Risks

The cost of competing is rising. Capital expenditures totaled $44.9 billion in the second quarter, and free cash flow was negative $5.9 billion. To fund its AI buildout, Alphabet announced the upsizing and pricing of an $84.75 billion equity capital raise on Jun. 3, which increases the share count. The large equity gains in reported Earnings are non-operating and can reverse.

Search remains the key vulnerability. If Gemini's progress stalls or AI assistants take a larger share of commercial queries, the Business Mahaney calls central to the stock could come under pressure. Antitrust risk also has not disappeared despite the Sept. 2 ruling. The talent departures and DeepMind restructuring over the summer raise execution questions at a time when AI model releases are arriving every few weeks.

Gemini 4 and the Next Search Test

The most specific catalyst named by Mahaney is Gemini 4, which he expects later this year. Alphabet's third-quarter results, typically released in late October, will show whether Cloud growth holds near 80% and whether Search keeps growing in the high teens, although the company has not yet announced a date.

Investors will also watch consumer preference data comparing Gemini and ChatGPT, TPU customer wins, capital spending plans and any further antitrust developments.