A Google breakup could take years to play out, analysts say

Stock in Google parent Alphabet was an outlier to the downside Wednesday — (NASDAQ:GOOG) -3.3%, (NASDAQ:GOOGL) -3.3%, even as most Communication Services stocks were down fractionally — after Tuesday’s report that the Justice Dept. was considering a push to break up the tech behemoth following the agency’s antitrust case victory.

Last week, Google lost a landmark antitrust case regarding its search engine, and contracts compelling partners to make Google the default search method, in the biggest such competition case in two decades. The company still faces another antitrust case set to begin in September over its advertising technology.

As for the breakup push, though, analysts are expressing skepticism that such a move could happen quickly, or even at all.

Wedbush’s takeaway: The research firm calls the possibility of Google breaking up “a stretch,” as the company will readily appeal the rulings, which will be in courts for a long time.

“The last few years, the strong have gotten stronger in Big Tech as the Al Revolution has taken hold,” analyst Dan Ives wrote. “While the EU has been after Big Tech for the last decade with only minor victories from Brussels, the bigger worry on the Street is the DOJ is now finally gaining some traction in its Game of Thrones Battle vs. the Big Tech stalwarts. Google’s win last week was a huge notch on the belt for the DOJ, and now Apple (AAPL), Amazon (AMZN), Meta (META), and others will be the focus. We continue to believe a breakup of the Big Tech business models is highly unlikely down the road, although business model tweaks and heavier scrutiny of M&A will be front and center.”

The research firm thinks it may take “several quarters and possibly years” for a final outcome to be reached on DOJ antitrust action, and it does not expect any impact to Google’s near-term operations.

BMO’s takeaway: BMO analysts looked to the 1998 Microsoft antitrust case where the software giant was accused of monopolistic practices, and noted that it took six years from filing to settlement approval.

“The outcome is uncertain, yet we believe both simultaneous cases may weigh on GOOGL shares” in the near term, analyst Brian Pitz noted. “We continue to view GOOGL as the leader in Gen Al over the medium-to-longer term, although we realize nearer-term trial headline risk could be meaningful.”

The research firm, while incrementally more cautious in the near term on GOOGL shares, stuck to its Outperform rating.