Citigroup Cuts Alphabet Target Price 15% Amid Tariff Concerns

Citigroup has reduced its target price for Alphabet Inc. (GOOGL.US) from $229 to $195 following the company's Google Cloud Next Conference 2025 held on Wednesday. Despite this reduction, Citigroup has maintained its "buy" rating for the company. The adjustment comes as analysts, led by Ronald Josey, consider potential impacts on Alphabet's advertising business due to tariff pressures.

The conference showcased Google's latest advancements in cloud computing, including progress in artificial intelligence tools, particularly the Gemini 2.5 series models, new proxy products, and infrastructure upgrades such as the seventh-generation Tensor Processing Unit chips. Analysts noted that despite current macroeconomic challenges, discussions around AI and seat benefits/savings were more optimistic, which was surprising.

However, Citigroup's analysts maintained the "buy" rating but lowered the target price due to limited visibility in the broader online advertising sector, partly attributed to tariff impacts. They remain confident that Google's product halo and the new search experience driven by AI models can drive search usage and relatively stable revenue growth. The analysts are also looking forward to the annual developer conference, Google I/O, scheduled for May 20, to gain deeper insights into Google's AI products.

During the conference, the company unveiled new Gemini models, including Gemini 2.5 Flash, and other product updates. CEO Sundar Pichai reaffirmed the company's commitment to investing approximately $750 billion in building data center infrastructure.