Alphabet Inc. - Class A "GML 2026 - Focused on Budget Share Expansion" (Neutral)

Research evidence excerpt

Alphabet Inc. - Class A "GML 2026 - Focused on Budget Share Expansion" (Neutral)

coding agents and engineer efficiency, and therefore allow

marketers to do more with less agency headcount. Similarly, an easier process

for ad creation and updating creatives should also reduce costs, which can then

be redeployed into ad budgets. For SMBs, this should make it easier to spin up

budgets on Google as it reduces the cost and headcount burden to compete

with larger advertisers.

Gemini Omni to enable easier editing for YouTube Shorts and in YouTube Create

app.

UBS View: As we already flagged in our I/O 2026 note, the Gemini Omni

update is likely to be expansionary to Shorts viewable hours, similar to what

Meta has noted with Creator AI.

GenAI enabled YouTube ad formats - already previewed at YouTube Brandcast last

week - were also demonstrated. These updates allow more targeted ad placement

within a video, allow additional content alongside a YouTube ad, create more ad

opportunities alongside creator content, and allow two click checkouts.

UBS View: YouTube ads have recently fallen short of estimates with one of the

headwinds being that stronger subscription growth has reduced the number of

available ad-supported users. We think the new updates should boost YouTube

revenue growth by creating more ad opportunities and better matching, while

allowing a quicker process to move from inspiration to transaction.

Valuation: Reiterate Neutral and $410 Price Target

Our 2027 and 2028 Search and YouTube combined ad revenue estimates of $341B and

$379B, respectively, are ahead of Street's $339B and $375B. As such, we are already

giving Google credit for improving monetization and therefore make no changes to our

estimates.