Alphabet's $482 Billion Day: BofA Now Values Google Search at 10x Earnings

Alphabet lost about $482 billion in market value on Thursday, its worst day as a public company, and Bank of America now values Google search at roughly 10 times earnings — cheaper than energy stocks, the S&P 500's lowest-priced sector at 13x.

Class A shares fell 12.6% to $283.82, the steepest drop since Alphabet began trading in 2004. The previous record was March 2020, when the stock fell 11.6%. The S&P 500, for comparison, trades at 18.7x forward earnings, according to FactSet.

What triggered the selloff?

The numbers came from the third quarter. Search and other revenue grew 12% to $63.35 billion. Analysts expected 15%. Growth has decelerated every quarter this year: 19% in the first, 17% in the second, 12% now.

Google Cloud did the opposite. Revenue more than doubled, up 103% to $30.71 billion, with operating margin expanding to 36.2% from 23.7% a year earlier. But Alphabet spent $51.4 billion on capex in the quarter — more than double a year earlier — and free cash flow came in at negative $9.1 billion, according to its earnings release. The quarter also absorbed a one-time $8.7 billion mark-to-market hit on Alphabet's SpaceX stake, which BofA said cost 55 cents a share.

How did the analysts react?

Three months ago, BofA analyst Justin Post had the whole company at about 22x his 2027 earnings estimate, in line with historical averages. On Thursday, at the after-hours price near $291, that stood at about 19x, with core search at roughly 10x inside it. He kept his Buy rating, cut his price target to $380 from $430, and lowered the multiple he'll pay to 24x from 27, citing the "slowdown in high-margin search growth."

"Search AI transition will fuel the bears," Post and co-author Nitin Bansal wrote.

"The bears will argue this is the first quarter that AI is starting to seriously hurt their search business," Pivotal Research CEO Jeffrey Wlodarczak said, as previously reported by Yahoo Finance.

Why is search slowing if more people search?

The slowdown comes despite rising usage. "Our year-over-year query growth rate is the highest it's been in the last 5 years," CEO Sundar Pichai said on Wednesday's earnings call.

BofA estimates currency-adjusted search growth slowed three percentage points from the prior quarter, "despite accelerating y/y query growth." The analysts attribute most of that to a comparison two points tougher than last quarter's. They wrote that Google indicated the shift of traffic to AI Overviews — the AI-written summaries atop results — was a small headwind, and "likely bigger" internationally, where ad loads in the summaries are just starting to ramp.

Google's fix is more ads inside the summaries. "We're now scaling high-quality ads within AI Overviews and AI Mode to more users and queries," chief business officer Philipp Schindler said on the call. "This includes taking our monetization footprint global for the first time."

The summaries change user behavior. A Pew Research Center study published in July 2025 found users who saw an AI summary clicked a traditional search result on about 8% of visits, versus 15% without one — though it measured clicks to websites, not Google's ad revenue.

What's paying for the capex bill?

Most of the gap between Alphabet's 19x multiple and search's 10x comes from Google Cloud's boosted value. BofA also now models $75 billion in 2027 sales of TPUs, Google's in-house AI chips, to outside customers.

The spending keeps climbing. CFO Anat Ashkenazi said in July that Alphabet expects capex "to increase significantly in 2027." The company confirmed its full-year forecast this week: roughly $200 billion in 2026, rising to $300 billion in 2027. Founders Larry Page and Sergey Brin lost an estimated $60 billion combined on paper, according to Forbes.

When does the story turn?

BofA's bull case runs on a calendar. Tough comparisons last through the second quarter of 2027, "which could make Google a 2H'27 story," the analysts wrote, with "potential for a growth uptick as early as 1Q" from international ads in AI Overviews. Their model excludes the moonshots entirely: "Early-stage bets like Waymo & quantum computing offer meaningful long-term optionality," they wrote, "not in valuation."

In plain terms: BofA still rates Alphabet a Buy, but investors now have to wait until late 2027 for the payoff.