3J·

Alphabet and the US judiciary: what is the current status?

I recently asked myself again what has actually happened to the court cases against $GOOGL (+0,08 %) has become. Last year there was another big sell-off, but as is always the case, people first react to the news and then say they're going to appeal. $GOOG (+0,07 %) that they are going to appeal and then somehow everyone forgets that anything ever happened.

But does it really work like that? You have to recognize that it's not enough to simply appeal to prevent a break-up, but it might be helpful to win something in court. And it doesn't look like that at the moment.

But what is it actually about? I'll leave out all the bullshit lawsuits from the EU about GDPR, DMA and consumer protection. The EU is just a paper tiger bullying US tech companies anyway because there are no tech companies in the EU that could be regulated. But in the end there's not much they can do anyway. Much worse is when the US courts get involved with Alphabet, because then the house could really burn.

The following 3 proceedings are currently underway:

1. search engine market lawsuit (United States v. Google LLC, 2020)

What is it about?

On August 5, 2024 Judge Amit Mehta ruled that Google has an illegal monopoly in the field of online search and search advertising constitutes.
In November 2024 the US Department of Justice (DOJ) set out specific remedies including, for example, the spin-off of the Chrome browseran end to exclusive default deals (e.g. with Apple) or enforced data sharing for competitors
Google rejected these proposals as "extreme" and argues that a sale of Chrome or restrictions on Android would jeopardize innovation and national security
The The court hearing for the final decision on the remedies began in spring 2025; the judgment will be by August 2025 expected

2. advertising technology monopoly (Ad Tech, 2023 lawsuit)

What is at stake?

On April 17, 2025 Judge Leonie Brinkema declared Google guilty of maintaining an illegal monopoly in its advertising technology business (ad exchange, ad server). illegal monopoly to have formed an illegal monopoly
Google intends to appeal against this judgment appeal against this judgment.
The DOJ is now calling for serious sanctions, including the sale of entire parts of the ad tech business

3rd Epic Games lawsuit (Play Store and in-app purchases)

What is it about?

A US appeals court has on July 31, 2025 (i.e. last Thursday) confirmed the decision from 2023, according to which Google's app distribution model on Android to be anti-competitive and enforced forced in-app billing.
Google is forced, third-party app stores (e.g. Epic itself) in the Play Store and to allow external payment options to allow external payment options.

So in summary, Google is accused of the search engine being illegal, the advertising business being illegal and the App Store also being illegal. I find it remarkable that news like this that threatens the business model is simply ignored because an appeal has been lodged. But if the appeal doesn't work out either, they don't even talk about it. Last Thursday's ruling now means a drastic slump in Android sales in the order of several billion per year. That would have been worth a post.

Such regulatory measures hit Google particularly hard. In principle, it is not so bad for shareholders when companies are broken up. This may even be positive for growth if we were talking about railroad, steel or oil production companies - business models that work perfectly well on their own. Google, on the other hand, is often figuratively depicted as a "data octopus". Now, if you simply cut off one of the octopus's arms, the octopus won't benefit, but at the same time you can't do much useful with the arm. So if Chrome is split off, this means that an enormous synergy effect is lost, but Chrome without Google is also for the garbage can.

The bottom line is that I can't quite understand why people keep raving about Alphabet being so cheap. With other companies, it is enough for some here that the DOJ scrutinizes the cousin of the CEO's uncle so that -99% market cap is absolutely justified and Alphabet, which has suffered real defeats in real court cases, is considered a safe bank.

At the moment, I would pay a maximum of USD 150 for Alphabet, but at the USD 190 currently being called for, you should really be 1000% sure that Google will not be convicted again this August.

15 Commentaires

ThemenmitKopf@topicswithhead

The Epic games store has not yet been decided. The first decision only states that you can bypass the google pay or google play store system. But that doesn't mean that Epic is allowed in the store. As far as I understand it, this will come later

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ThemenmitKopf@topicswithhead

@topicswithhead Regardless of this, I find it rather critical. What should Alphabet be worth? Google search will continue to bring in money. GCP is an extremely attractive cloud and clearly different from the other providers. It is closer to Cloudflare than to Aws. Open ai is supposedly worth 300 billion, then Deepmind is probably worth at least that. Waymo is interesting and probably also worth 50 billion. YouTube is also still around. Made by Google is small but the tech bubble loves the products. Then there is Android. Google's quantum division is leading. Isomorbics lab is probably worth 20 billion if you look at other listed AI Medtech. Google Fiber is also interesting. There is a lot the company is just incredibly complex. In addition, Google Ventures has, for whatever reason, often made really good investments.

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Soprano@Soprano

@topicswithhead Well, I haven't been able to find out exactly what will happen to the Play Store now, what deadline etc., but it seems to be the case that Google has finally lost the thing.

Otherwise, it is of course also the case that Search and AI will possibly cannibalize each other to a certain extent. It will hardly be the case that both can grow in the long term. In an AI bull scenario, AI will simply make classic search engines completely superfluous in the medium term. On the other hand, you could also open up an AI bear scenario, as it is not yet clear when AI will actually pay off. The business model will certainly catch on at some point, but a lot of money will still be burned for a long time to come because the computing power behind it can hardly be refinanced at the moment. For 300 billion, you could buy more profitable companies in the long term than OpenAI.

Google is certainly doing the right thing by being very strong in both areas, but I think it is an illusion to assume that both areas can coexist in the long term.

Apart from that, I am not saying that Alphabet should be traded at an absolute discount. Even at USD 150, we are still talking about USD 1.8 trillion. I'll pay you 600 billion for the cloud, 400 billion for the search engine and then I still have 700 billion for the rest.

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ThemenmitKopf@topicswithhead

@Soprano I still don't think that's enough. For now, search can coexist, at least for the next few years. Search volume is already being lost to AI, but search and ads, i.e. search for purchases, remain with Google. Studies show that links in AI are only clicked by 1% on average. If you give 600 billion for the cloud, 450 billion for search, then YouTube, Deepmind, waymo, isomorbics, made by google, AdSense, Google Quantum, Google Fiber and co should only be worth 700 billion? So according to my calculations, it makes no sense at all

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Soprano@Soprano

@topicswithhead Youtube 100 billion (Tiktok is valued at 66 billion), Waymo 50 billion. Isomorbics 20 billion. AdSense I give you 100 billion. for Quantum 20 billion and for Deepmind I would pay a maximum of 100 billion just like Open Ai = a total of 400 billion and I give you 700 billion for the bundle because I think that some things could be positively surprising.

I think you are already pricing a lot of growth fantasy into certain areas that are not yet foreseeable. For example, I think you certainly want 250 billion for Quantum, but if you look at the leading quantum computer start-ups (pure play), the likes of IonQ, Rigetti, PsiQuantum are somewhere around 3 billion. If you get 10 times that for the Google unit, that's really fair. Because at the moment there are no products ready for series production and no sales at all, and we don't yet know who will be the leader. At the moment, Google is still expected to have a big technological lead, but even in 2015 I would have bet everything on IBM for LLM instead of OpenAI and Deepseek.

I also think Google Fibre is cool, but you would hardly get anything for it individually. According to various sources, they have a turnover of less than 2 billion and are not even profitable. The worst thing, however, is that they are not growing exponentially but are only adding 2 cities per year. If you look at the big picture, it's a great business for Google as a company in the long term, but if they had to sell it, it would be a single-digit billion sum at most, just like Chrome.

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ThemenmitKopf@topicswithhead

@Soprano would have actually only given Quantum 25 but if you rate it that high 🤣. Ne Google Search 2 to 3 revenue. YouTube 4-5, Deepmind your 100 billion, AdSense your 100 billion, cloud 5 times revenue, iso and Quantum 20 each, Android not deliverable, Fiber not deliverable, waymo 60 billion and then many other things are missing. The satellite division and a few other things. Google is valued at about 5 times revenue, which means I'm taking a brutally conservative view here and estimating even worse than the market and significantly below you and still come in at 1.2 bio, even though I'm taking less than you in the cloud, less for deepmind and less than the market is obviously pricing now. If you then include the US valuation and the missing values Android, made by Google, and co, you easily come out at 2.4 fair value. If I were to take the same approach as you, Amazon would probably be worth significantly less and Apple probably dead.

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Shell@Shell

Search revenue is still climbing QoQ with 12% and expected to stay this way with AI leading to more search usage and AI overviews and AI mode (gemini) in search also in EU soon. More revenue per search query/advertisement even with AI. YouTube is (by head, soon to be?) bigger then Netflix alone and the future of streaming, cloud segment is growing 32% YoY and the best of the big 3 for AI workloads and inferencing (OpenAI partnership), margins on cloud are increasing. Even without search segment in a few years, with YouTube and Cloud segment growing as they are alone the valuation is justitied. Then you have potential in like Waymo, Quantum (Some Day) etc. I was an Alphabet skeptical but my view has changed after doing more research.

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Soprano@Soprano

@topicswithhead But then we are actually 99% in agreement again. You somehow come out at 1.2 bio sum of the parts I come out at 1.4 bio sum of the parts and I say I pay another 20% premium but you say the fair value is at 100% premium :D

Whereby you justify your premium mainly with the "US Tech Label"
and I mainly see the regulatory and legal risks that would have to discount a good part of the premium again.

Amazon even has a lot of room for improvement. I would already pay 1.2 trillion for the cloud business and thus half the market cap. Then another 400 billion for the online retailer, 200 billion for Amazon Media (Prime), the logistics division could be worth 80 billion, the advertising platform around 250 billion and perhaps another 50 billion for small things like Whole Foods and Project Kuiper, which brings me to 2.1 trillion, i.e. pretty much just under the actual market cap. And I would even add another 30% premium to that (2.8 trillion, i.e. USD 270 would be conceivable for me)

But you're right about Apple, I would pay less for Apple than for Alphabet. Apple should actually be cheaper than Alphabet with all the things that are going better at Alphabet

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ThemenmitKopf@topicswithhead

@Soprano I say the premium has to be higher because I value below the market plus the sum int part counterparts are worth even more in P/E terms. Of course a YouTube would not get a 20 P/E and search would be below 20. But apart from that, I don't see the Amazon valuation as much. So you're really talking up the cloud units. If I had taken your 600 billion for GCP, I would have been conservative at 1.5 bio. Amazon has proven several times that they can't do anything except Amazon and Aws, so I don't see how the other stuff is going to be good. Everything they've touched has gone under so far. Apart from that, the ads business is dependent on Amazon, so it's not bad, but I think it deserves a discount.

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Soprano@Soprano

@topicswithhead Okay, the last point is approved. But if there's a world champion among the Mag7 for pipe failures, it's clearly Google: G.Plus, G.Stadia, G.Glass, G.Wave, G.Allo, G.Lively. Google is a pure tech company that has been failing again and again for decades, especially with social networks and hardware. Amazon is a mail-order bookseller that will soon be launching satellites into space. I think outside of Japan, where a cab company developed Super Mario, there is hardly a Western company that has managed to be successful with more things.

And yes, of course I'm talking up the cloud, because the cloud is currently the coolest shit there is. It can be scaled almost infinitely and, unlike all other future technologies (AI, autonomous driving, robotics, quantum computing, space stuff, nuclear fusion), it's extremely profitable now and not in 20 years' time.

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ThemenmitKopf@topicswithhead

@Soprano google products almost never fail to be adopted. Mostly the users take it very well but Google lets the products die. See countless products on the google rip page. Kuiper is completely overhyped. Not that it shouldn't be valuable but why should it be just a bit better than Starlink? Starlink not only has 10 times the satellites, but also vertically the rockets with Space X and is also the price leader. Besides, someone who has a space x panel didn't also adopt a kuiper. As if that wasn't all, there are a number of companies that do this, including Google. On the subject of Japan, I'll just say. Amazon generally has a legal problem like the other bigs. back to the topic of amazon howl is a fail, Amazon pharmacy is too. Amazon wholesale or whatever it's called is probably 5 years behind estimated adoption and as a result 50 other iron delivery start ups have formed. Twitch was cash burning for years and so much more. Plus there is the problem of latin america, china and India where you are not or can't hold space leader. It just shows that Amazon can only do logistics and AWS properly. All other projects are not fails, but were missed hard.

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